**Exhibit10.101**

 

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ASSET PURCHASE AGREEMENT

 

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By and Among

 

AUDIOVOX COMMUNICATIONSCORP.

 

QUINTEX MOBILE COMMUNICATIONS CORPORATION

 

AUDIOVOX COMMUNICATIONSCANADA CO.

 

UTSTARCOM, INC.

 

UTSTARCOM CANADA COMPANY

 

and

 

with respect to Sections2.05, 2.07, 2.09, 3.01, 3.02, 3.11(b), 3.30, 5.06, 5.08, 5.19, 5.20, 5.21,5.22, 5.24 and Articles VII – X only,

 

AUDIOVOX  CORPORATION

 

Dated as of June 11, 2004

 

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TABLE OF CONTENTS

 
| ARTICLE I                                                                                               | Page   |
|---------------------------------------------------------------------------------------------------------|--------|
|                                                                                                    |   |
| DEFINITIONS                                                                                             |   |
|                                                                                                    |   |
| SECTION 1.01. Certain Defined Terms                                                                     | 2      |
| SECTION 1.02. Definitions                                                                               | 14     |
| SECTION 1.03. Interpretation and Rules of  Construction                                                 | 15     |
|                                                                                                    |   |
| ARTICLE II                                                                                              |   |
|                                                                                                    |   |
| PURCHASE AND  SALE                                                                                      |   |
|                                                                                                    |   |
| SECTION 2.01. Purchase and Sale of  Purchased Assets                                                    | 16     |
| SECTION 2.02. Assumption and Exclusion of  Liabilities                                                  | 18     |
| SECTION 2.03. Purchase Price; Allocation of  Purchase Price                                             | 20     |
| SECTION 2.04. Closing                                                                                   | 20     |
| SECTION 2.05. Closing Deliveries by the  Seller                                                         | 20     |
| SECTION 2.06. Closing Deliveries by the  Purchaser                                                      | 21     |
| SECTION 2.07. Post-Closing Adjustment of  Purchase Price                                                | 22     |
| SECTION 2.08. Escrow                                                                                    | 25     |
| SECTION 2.09. Receivables                                                                               | 25     |
| SECTION 2.10. Inventories                                                                               | 26     |
|                                                                                                    |   |
| ARTICLE III                                                                                             |   |
|                                                                                                    |   |
| REPRESENTATIONS AND  WARRANTIES  OF THE SELLER                                                          |   |
|                                                                                                    |   |
| SECTION 3.01. Organization, Authority and  Qualification and Corporate Power of the Seller and Audiovox | 27     |
| SECTION 3.02. No Conflict                                                                               | 28     |
| SECTION 3.03. Governmental Consents and  Approvals                                                      | 28     |
| SECTION 3.04. Financial Information; Books  and Records                                                 | 28     |
| SECTION 3.05. Absence of Undisclosed  Liabilities                                                       | 29     |
| SECTION 3.06. Receivables                                                                               | 29     |
| SECTION 3.07. Inventories                                                                               | 29     |
| SECTION 3.08. Assumed Contracts                                                                         | 30     |
| SECTION 3.09. Sales and Purchase Order  Backlog                                                         | 30     |
| SECTION 3.10. Conduct in the Ordinary  Course; Absence of Certain Changes, Events and Conditions        | 30     |
| SECTION 3.11. Litigation                                                                                | 33     |
| SECTION 3.12. Compliance with Laws                                                                      | 34     |
| SECTION 3.13. Environmental and Other  Permits and Licenses; Related Matters                            | 34     |

 

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| SECTION 3.14. Material Contracts                                         | 35     |
|--------------------------------------------------------------------------|--------|
| SECTION 3.15. Intellectual Property                                      | 37     |
| SECTION 3.16. Real Property                                              | 38     |
| SECTION 3.17. Tangible Personal Property                                 | 39     |
| SECTION 3.18. Assets                                                     | 40     |
| SECTION 3.19. Customers                                                  | 40     |
| SECTION 3.20. Suppliers                                                  | 40     |
| SECTION 3.21. Employee Benefit Matters                                   | 41     |
| SECTION 3.22. Labor Matters                                              | 42     |
| SECTION 3.23. Key Employees                                              | 43     |
| SECTION 3.24. Certain Interests                                          | 44     |
| SECTION 3.25. Taxes                                                      | 44     |
| SECTION 3.26. Insurance                                                  | 44     |
| SECTION 3.27. Certain Business Practices                                 | 45     |
| SECTION 3.28. INTENTIONALLY OMITTED                                      | 45     |
| SECTION 3.29. Brokers                                                    | 45     |
| SECTION 3.30. Board Approval; Vote Required                              | 45     |
|                                                                     |   |
| ARTICLE IV                                                               |   |
|                                                                     |   |
| REPRESENTATIONS  AND WARRANTIESOF  THE PURCHASER                         |   |
|                                                                     |   |
| SECTION 4.01. Organization and Authority of  the Purchaser               | 46     |
| SECTION 4.02. No Conflict                                                | 46     |
| SECTION 4.03. Governmental Consents and  Approvals                       | 46     |
| SECTION 4.04. Financing                                                  | 47     |
| SECTION 4.05. Litigation                                                 | 47     |
| SECTION 4.06. Brokers                                                    | 47     |
| SECTION 4.07. UTStarcom Canada                                           | 47     |
|                                                                     |   |
| ARTICLE V                                                                |   |
|                                                                     |   |
| ADDITIONAL  AGREEMENTS                                                   |   |
|                                                                     |   |
| SECTION 5.01. Conduct of Business Prior to  the Closing                  | 47     |
| SECTION 5.02. Access to Information                                      | 48     |
| SECTION 5.03. Confidentiality                                            | 49     |
| SECTION 5.04. Regulatory and Other  Authorizations; Notices and Consents | 49     |
| SECTION 5.05. Notice of Developments                                     | 50     |
| SECTION 5.06. No Solicitation or  Negotiation                            | 50     |
| SECTION 5.07. Use of Intellectual Property                               | 53     |
| SECTION 5.08. Non-Competition                                            | 53     |
| SECTION 5.09. INTENTIONALLY OMITTED                                      | 54     |
| SECTION 5.10. Bulk Transfer Laws                                         | 54     |
| SECTION 5.11. Inter-company Arrangements                                 | 54     |
| SECTION 5.12. Payments on Behalf of  Affiliates                          | 54     |

 

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| SECTION 5.13. Transition Services                                   | 54     |
|---------------------------------------------------------------------|--------|
| SECTION 5.14. Tax Cooperation and Exchange  of Information          | 54     |
| SECTION 5.15. Conveyance Taxes                                      | 55     |
| SECTION 5.16. Further Action                                        | 55     |
| SECTION 5.17. INTENTIONALLY OMITTED                                 | 55     |
| SECTION 5.18. Proration of Taxes and  Certain Charges               | 56     |
| SECTION 5.19. Proxy Statement                                       | 56     |
| SECTION 5.20. Audiovox Stockholders’  Meeting                  | 57     |
| SECTION 5.21. Trademark License Agreement                           | 57     |
| SECTION 5.22. Replication Service                                   | 57     |
| SECTION 5.23. Limited Updating of  Disclosure Schedules             | 58     |
| SECTION 5.24. Leases                                                | 58     |
| SECTION 5.25. Section 404 Compliance                                | 58     |
|                                                                |   |
| ARTICLE VI                                                          |   |
|                                                                |   |
| EMPLOYEE MATTERS                                                    |   |
|                                                                |   |
| SECTION 6.01. Offer of Employment                                   | 58     |
|                                                                |   |
| ARTICLE VII                                                         |   |
|                                                                |   |
| CONDITIONS  TO CLOSING                                              |   |
|                                                                |   |
| SECTION 7.01. Conditions to Obligations of  the Seller and Audiovox | 59     |
| SECTION 7.02. Conditions to Obligations of  the Purchaser           | 60     |
|                                                                |   |
| ARTICLE VIII                                                        |   |
|                                                                |   |
| INDEMNIFICATION                                                     |   |
|                                                                |   |
| SECTION 8.01. Survival of Representations  and Warranties           | 61     |
| SECTION 8.02. Indemnification by the Seller  and Audiovox           | 62     |
| SECTION 8.03. Indemnification by the  Purchaser                     | 63     |
| SECTION 8.04. Limitation on Obligation to  Indemnify                | 63     |
| SECTION 8.05. Notice of Loss; Third Party  Claims                   | 64     |
| SECTION 8.06. Distributions from Escrow  Fund                       | 65     |
| SECTION 8.07. Other Provisions                                      | 65     |
| SECTION 8.08. Tax Treatment                                         | 65     |
|                                                                |   |
| ARTICLE IX                                                          |   |
|                                                                |   |
| TERMINATION, AMENDMENT AND  WAIVER                                  |   |
|                                                                |   |
| SECTION 9.01. Termination                                           | 65     |
| SECTION 9.02. Effect of Termination                                 | 67     |
| SECTION 9.03. Expenses                                              | 67     |
| SECTION 9.04. Amendment                                             | 67     |

 

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| SECTION 9.05. Waiver                        | 68     |
|---------------------------------------------|--------|
|                                        |   |
| ARTICLE X                                   |   |
|                                        |   |
| GENERAL  PROVISIONS                         |   |
|                                        |   |
| SECTION 10.01. Notices                      | 68     |
| SECTION 10.02. Public Announcements         | 69     |
| SECTION 10.03. Severability                 | 69     |
| SECTION 10.04. Entire Agreement             | 69     |
| SECTION 10.05. Assignment                   | 70     |
| SECTION 10.06. No Third Party Beneficiaries | 70     |
| SECTION 10.07. Governing Law                | 70     |
| SECTION 10.08. Waiver of Jury Trial         | 70     |
| SECTION 10.09. Arbitration                  | 70     |
| SECTION 10.10. Currency                     | 71     |
| SECTION 10.11. Counterparts                 | 71     |

 

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EXHIBITS

 
| Exhibit A   |   | Rules for Valuing Inventories                 |
|-------------|--------|-----------------------------------------------|
|        |   |                                          |
| 1.01(a)     |   | Form of Trademarks and Domain Name Assignment |
|        |   | Form of Patent Assignment                     |
|        |   |                                          |
| 1.01(b)     |   | INTENTIONALLY OMITTED                         |
|        |   |                                          |
| 1.01(c)     |   | Form of Assumption Agreement                  |
|        |   |                                          |
| 1.01(d)     |   | Form of Bill of Sale and Assignment           |
|        |   |                                          |
| 2.08        |   | Form of Escrow Agreement                      |
|        |   |                                          |
| 5.13        |   | Form of Transition Services Agreement         |
|        |   |                                          |
| 5.21        |   | Form of Trademark License Agreement           |
|        |   |                                          |
| 7.02(i)(i)  |   | 555 Wireless Sublease Term Sheet              |
|        |   |                                          |
| 7.02(i)(ii) |   | Cerritos Lease Term Sheet                     |

 

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DISCLOSURE SCHEDULE

 

The Disclosure Schedule shall include the followingSections:

 
| **Section**         | ** ** | **Title**                                                                                 |
|---------------------|------------|-------------------------------------------------------------------------------------------|
| ** **          | ** ** | ** **                                                                                |
| **1.01**            |       | Shared MIS Software                                                                       |
| **2.01(a)(x)**      |       | Assumed Contracts                                                                         |
| **2.01(b)(vii)**    |       | Excluded Intellectual  Property                                                           |
| **3.01(c)**         |       | Organization, Authority and  Qualification and Corporate Power of the Seller and Audiovox |
| **3.02(c)**         |       | No Conflict                                                                               |
| **3.03**            |       | Governmental Consents and  Approvals                                                      |
| **3.04(a)(i)**      |       | Financial Information; Book  and Records                                                  |
| **3.05**            |       | Absence of Undisclosed  Liabilities                                                       |
| **3.06**            |       | Receivables                                                                               |
| **3.07(a)(i)**      |       | Inventories                                                                               |
| **3.07(****a)(ii)** |       | Inventories                                                                               |
| **3.07(a)(iii)**    |       | Inventories                                                                               |
| **3.07(b)**         |       | Inventories                                                                               |
| **3.08**            |       | Acquired Assets                                                                           |
| **3.09(a)**         |       | Sales and Purchase Order  Backlog                                                         |
| **3.09(b)**         |       | Sales and Purchase Order  Backlog                                                         |
| **3.10(d)**         |       | Conduct in the Ordinary  Course; Absence of Certain Changes, Events and Conditions        |
| **3.10(k)**         |       | Conduct in the Ordinary  Course; Absence of Certain Changes, Events and Conditions        |
| **3.10(m)**         |       | Conduct in the Ordinary  Course; Absence of Certain Changes, Events and Conditions        |
| **3.10(o)**         |       | Conduct in the Ordinary  Course; Absence of Certain Changes, Events and Conditions        |
| **3.10(p)**         |       | Conduct in the Ordinary  Course; Absence of Certain Changes, Events and Conditions        |
| **3.11(a)**         |       | Litigation                                                                                |
| **3.12(a)**         |       | Compliance with Laws                                                                      |
| **3.12(b)**         |       | Compliance with Laws                                                                      |
| **3.13(a)**         |       | Environmental and Other  Permits and Licenses; Related Matters                            |
| **3.14(a)**         |       | Material Contracts                                                                        |
| **3.14(b)**         |       | Material Contracts                                                                        |
| **3.14(e)**         |       | Material Contracts                                                                        |
| **3.15(a)(i)**      |       | Intellectual Property                                                                     |
| **3.15(b)**         |       | Intellectual Property                                                                     |
| **3.15(f)**         |       | Intellectual Property                                                                     |
| **3.15(g)**         |       | Intellectual Property                                                                     |
| **3.15(j)**         |       | Intellectual Property                                                                     |
| **3.16(c)**         |       | Real Property                                                                             |
| **3.16(d)**         |       | Real Property                                                                             |

 

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| **Section**     | ** ** | **Title**                                                  |
|-----------------|------------|------------------------------------------------------------|
| ** **      | ** ** | ** **                                                 |
| **3.16(g)**     |       | Real Property                                              |
| **3.17(a)**     |       | Tangible Personal Property                                 |
| **3.19**        |       | Customers                                                  |
| **3.20**        |       | Suppliers                                                  |
| **3.21(a)**     |       | Employee Benefit Matters                                   |
| **3.21(b)**     |       | Employee Benefit Matters                                   |
| **3.22**        |       | Labor Matters                                              |
| **3.23(a)**     |       | Key Employees                                              |
| **3.23(b)**     |       | Key Employees                                              |
| **3.24**        |       | Certain Interests                                          |
| **3.25(c)**     |       | Taxes                                                      |
| **3.25(e)**     |       | Taxes                                                      |
| **3.26**        |       | Insurance                                                  |
| **3.27(a)**     |       | Certain Business Practices                                 |
| **5.01(a)**     |       | Conduct of Business Prior to  the Closing                  |
| **5.01(b)**     |       | Conduct of Business Prior to  the Closing                  |
| **5.04**        |       | Regulatory and Other  Authorizations; Notices and Consents |
| **5.08(****a)** |       | Non-Competition                                            |
| **5.11**        |       | Inter-company Arrangements                                 |
| **6.01**        |       | Offer of Employment                                        |
| **7.02(e)(i)**  |       | Conditions to Obligations of  the Purchaser                |
| **7.02(e)(ii)** |       | Conditions to Obligations of  the Purchaser                |
| **7.02(g)**     |       | Conditions to Obligations of  the Purchaser                |

 

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ASSET PURCHASE AGREEMENT (this “Agreement”),dated as of June 11, 2004, by and among AUDIOVOX COMMUNICATIONS CORP., aDelaware corporation (“ACC”), QUINTEX MOBILE COMMUNICATIONS CORPORATION,a Delaware corporation (“Quintex”), AUDIOVOX COMMUNICATIONS CANADA CO.,a Nova Scotia company (“ACCC”; and, together with ACC and Quintex,collectively, the “Seller”), UTSTARCOM, INC., a Delaware corporation (“UTStarcom”),UTSTARCOM CANADA COMPANY, a Nova Scotia company (“UTStarcom Canada” and,together with UTStarcom, the “Purchaser”) and, with respect to Sections2.05, 2.07, 2.09, 3.01, 3.02, 3.11(b), 3.30, 5.06, 5.08, 5.19, 5.20, 5.21,5.22, 5.24 and Articles VII – X only, AUDIOVOX CORPORATION, a Delawarecorporation (“Audiovox”).

 

WHEREAS, the Seller is engaged in the business ofmarketing mobile cellular handset systems and other wireless communicationsdevices, including, without limitation, personal digital assistants,transceiver PCMCIA cards and non-telematic devices, that use the infrastructureof wireless communication carriers (“Carriers”) and are sold through theCarrier distribution channel which is comprised of (a) a direct channel (whichconsists of (i) retail stores owned by Carriers and (ii) the Carriers’ salesorganizations for corporate enterprise customers) through which Seller sellsproducts to Carriers; and (b) an indirect channel through which Seller sellsproducts to retailers, distributors and agents that are authorized by Carriersto activate products, to sell air time on behalf of Carriers, to promoteproducts to end users and to perform other activities that support the sale ofproducts to end users on behalf of Carriers. The Seller’s business, however,excludes consumer electronics products, including those with wirelesscommunications capability, not having as their primary function cellulartelephone connectivity or cellular telephone activation, but rather having astheir primary function entertainment, information processing, datadownloading/uploading, and security (e.g., products such as navigation devices,audio/video entertainment devices, computing devices and security products)(hereinafter the “Business”);

 

WHEREAS, the Seller wishes to sell to the Purchaser,and the Purchaser wishes to purchase from the Seller, the Business, includingall right, title and interest of the Seller in and to the property and assetsof the Business, and in connection therewith the Purchaser is willing to assumecertain liabilities of the Seller relating thereto, all upon the terms andsubject to the conditions set forth herein;

 

WHEREAS, the Boards of Directors of the Seller,Audiovox, and the Purchaser have determined that the transactions contemplatedby this Agreement are fair to and in the best interests of their respectivecorporations and stockholders and have approved and adopted this Agreement andthe transactions contemplated hereby;

 

WHEREAS, as a condition to the Purchaser’s willingnessto enter into this Agreement, the Purchaser and John Shalam (the “Stockholder”)has entered into a voting agreement dated as of the date hereof (the “VotingAgreement”), providing that, among other things, the Stockholder will voteall of his shares of stock of Audiovox (a) in favor of this Agreement and thetransactions contemplated in this Agreement and (b) against any action thatwould result in a breach of any covenant, representation, warranty or agreementunder this Agreement;

 

1

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WHEREAS, Audiovox and Toshiba Corporation, a Japanesecorporation, acting through its Mobile Communications Company (“Toshiba”)in their capacity as the sole shareholders of ACC have approved and adoptedthis Agreement and the transactions contemplated hereby;

 

WHEREAS, as an inducement to the Purchaser to enterinto this Agreement, the Seller shall facilitate the transfer of, and hiring bythe Purchaser as of the Closing, certain of the employees employed by theSeller in connection with the Business;

 

WHEREAS, ACCC and UTStarcom Canada are parties to thisAgreement solely for purposes of the transfer of the Canadian assets of theBusiness;

 

WHEREAS, as an inducement to the Purchaser to enterinto this Agreement, concurrently with the execution of this Agreement, PhilipChristopher has entered into an employment agreement with the Purchaser (the “EmploymentAgreement”);

 

WHEREAS, concurrently with the consummation of thetransactions contemplated hereby, Audiovox and the Purchaser will enter into aTrademark License Agreement substantially in the form attached hereto asExhibit 5.21, pursuant to which, among other things, Audiovox will license to thePurchaser certain rights in and to the Audiovox trademark, upon the terms andsubject to the conditions set forth in the Trademark License Agreement; and

 

WHEREAS, Audiovox and Toshiba are direct or indirectstockholders of the Seller.

 

NOW, THEREFORE, in consideration of the promises andthe mutual agreements and covenants hereinafter set forth, and intending to belegally bound, the Seller, Audiovox and the Purchaser hereby agree as follows:

 

# ARTICLE IDEFINITIONS

 

SECTION 1.01. Certain Defined Terms.  Forpurposes of this Agreement:

 

“ACC Internal Reporting Controls” means aprocess of internal financial reporting controls, including certain controlmatrices, to provide reasonable assurance regarding the reliability offinancial reporting of the Business and the preparation of financial statementsof the Business in accordance with GAAP, including the Reporting Policies andProcedures, in compliance with Section 404 and, in each case, designed to workwithin the policies and procedures constituting the UTSI’s Internal ReportingControls upon the consummation of the transactions contemplated by thisAgreement.

 

“Accounts Payable” means any and all accountspayable, notes and other amounts payable to third parties, including vendorsand employees, arising from the conduct of the Business, whether or not in theordinary course, together with any unpaid financing charges accrued thereon asdetermined in accordance with GAAP.

 

2

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“Accrued Expenses” means expenses of theBusiness, other than Excluded Accrued Expenses, that have been incurred, butnot yet paid for as determined in accordance with GAAP.

 

“Accrued Sales Incentives” means any and allamounts owed to customers under various sales incentives programs offered tothe customers of the Business as determined in accordance with GAAP.

 

“Acquisition Documents” means this Agreement,the Ancillary Agreements and the certificates delivered pursuant to Sections2.05(h) and 2.05(i).

 

“Action” means any claim, action, suit,arbitration, inquiry, proceeding or investigation by or before any GovernmentalAuthority.

 

“Affiliate” means, with respect to anyspecified Person, any other Person that directly, or indirectly through one ormore intermediaries, controls, is controlled by, or is under common controlwith, such specified Person; with respect to the Seller, such other Personshall include Audiovox but expressly exclude Toshiba.

 

“Ancillary Agreements” means the Bill of Sale,each Assignment of Lease, the Assignment of Intellectual Property, theTrademark License Agreement, the Assumption Agreement, the Transition ServicesAgreement and the Escrow Agreement.

 

“Assignment of Intellectual Property” means theassignment of Intellectual Property to be executed by the Seller at theClosing, substantially in the form of Exhibit 1.01(a).

 

“Assignment of Lease” means the Assignment ofLease to be executed by the Seller at the Closing with respect to each parcelof Leased Real Property listed on Section 3.16(b) of the Disclosure Schedule,in a form to be mutually agreed by the Seller and the Purchaser.

 

“Assumption Agreement” means the AssumptionAgreement to be executed by the Purchaser and the Seller at the Closing,substantially in the form of Exhibit 1.01(c).

 

“Bill of Sale” means the Bill of Sale andAssignment to be executed by the Seller at the Closing, substantially in theform of Exhibit 1.01(d).

 

“Business Day” means any day that is not aSaturday, a Sunday or other day on which banks are required or authorized byLaw to be closed in The City of New York.

 

“CERCLA” means the Comprehensive EnvironmentalResponse, Compensation and Liability Act of 1980, as amended through theClosing.

 

“Claims” means any and all administrative,regulatory or judicial actions, suits, petitions, appeals, demands, demandletters, claims, liens, notices of noncompliance or violation, investigations,proceedings, consent orders or consent agreements.

 

3

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“Closing Statement of Inventories” means theStatement of Inventories prepared by the Seller setting forth the amount ofInventories, net of reserves, of the Business as of 5:30 p.m. EST on the dateof the Closing, which Inventories, for purposes of the Closing Statement ofInventories, the Preliminary Net Working Capital Balance and the Final NetWorking Capital Balance shall be determined in accordance with the rules setforth in Exhibit A attached hereto.

 

“Closing Statement of Net Assets” means thestatement of Net Assets of the Business to be prepared pursuant toSection 2.07(a) and to be dated as of the close of business on the date ofthe Closing.

 

“Closing Statement of Receivables” means astatement certified by an officer of the Seller, including the informationconstituting the Receivables Listing and setting forth the Receivables Reserve.

 

“Code” means the Internal Revenue Code of 1986,as amended through the date hereof.

 

“Confidentiality Agreement” means thenon-disclosure agreement, dated February 11, 2004, among the Purchaser, Audiovoxand the Seller.

 

“Control” (including the terms “controlledby” and “under common control with”), with respect to therelationship between or among two or more Persons, means the possession,directly or indirectly or as trustee, personal representative or executor, ofthe power to direct or cause the direction of the affairs or management of aPerson, whether through the ownership of voting securities, as trustee,personal representative or executor, by contract, credit arrangement orotherwise.

 

“Conveyance Taxes” means all sales, use, valueadded, transfer, stamp, stock transfer, real property transfer or gains andsimilar Taxes, including, without limitation, Canadian GST and PST.

 

“Copyrights” means mask works, rights ofpublicity and privacy, and copyrights in works of authorship of any type,including Software, registrations and applications for registration thereofthroughout the world, all rights therein provided by international treaties andconventions, all  common law rightsthereto, and all other rights associated therewith.

 

“Customer” means the party on the ReceivablesListing owing a Receivable to the Seller.

 

“Determination of Satisfactory Controls” meansa determination by the Purchaser made reasonably and in good faith that theSeller has developed and implemented the ACC Internal Reporting Controls andthat the ACC Internal Reporting Controls are prepared for the commencement ofoutside auditor testing of compliance with Section 404.

 

“Developed Software” means Software created by,or for the use of, the Seller or Audiovox for use in the Business that is usedin conjunction with third-party Software and hardware.

 

4

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“Disclosure Schedule” means the DisclosureSchedule attached hereto, dated as of the date hereof, delivered by the Sellerto the Purchaser in connection with this Agreement.

 

“Documentary Acceptances” means amounts owed bythe Business for borrowed money under unsecured lines of credit with suppliersused to finance inventory purchases.

 

“Encumbrance” means any security interest,pledge, hypothecation, mortgage, lien (including environmental and tax liens),violation, charge, lease, license, encumbrance, servient easement, adverseclaim, reversion, reverter, preferential arrangement, restrictive covenant,condition or restriction of any kind, including any restriction on the use,voting, transfer, receipt of income or other exercise of any attributes ofownership.

 

“Environment” means surface waters,groundwaters, soil, subsurface strata and ambient air.

 

“Environmental Claims” means any Claimsrelating in any way to any Environmental Law or any Environmental Permit,including (a) any and all Claims by Governmental Authorities for enforcement,cleanup, removal, response, remedial or other actions or damages pursuant toany applicable Environmental Law and (b) any and all Claims by any Personseeking damages, contribution, indemnification, cost recovery, compensation orinjunctive relief resulting from Hazardous Materials or arising from allegedinjury or threat of injury to health, safety or the Environment.

 

“Environmental Laws” means all Laws, now orhereafter in effect and as amended, and any judicial or administrativeinterpretation thereof, including any judicial or administrative order, consentdecree or judgment, relating to the environment, health, safety, naturalresources or Hazardous Materials, including CERCLA; the Resource Conservationand Recovery Act, 42 U.S.C. §§ 6901 etseq.; the HazardousMaterials Transportation Act, 49 U.S.C. §§ 6901 etseq.; theClean Water Act, 33 U.S.C. §§ 1251 etseq.; the Toxic SubstancesControl Act, 15 U.S.C. §§ 2601 etseq.; the Clean Air Act, 42U.S.C. §§ 7401 etseq.; the Safe Drinking Water Act, 42 U.S.C. §§300f etseq.; the Atomic Energy Act, 42 U.S.C. §§ 2011 etseq.;the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 etseq.; and the Federal Food, Drug and Cosmetic Act, 21 U.S.C. §§ 301 etseq.

 

“Environmental Permits” means all permits,approvals, identification numbers, licenses and other authorizations requiredunder or issued pursuant to any applicable Environmental Law.

 

“ERISA Affiliate” of any Person means any otherPerson that is a member of the same controlled group of such Person forpurposes of Section 4001(a)(14) of ERISA.

 

“Escrow Agent” means J.P. Morgan-Chase.

 

“Escrow Amount” means an amount equal to 5% ofthe Purchase Price.

 

“Escrow Fund” means the Escrow Amount depositedwith the Escrow Agent as such sum may be increased or decreased as provided inthe Escrow Agreement.

 

5

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“Excluded Accrued Expenses” means payroll,divisional bonuses, FICA, withholding taxes, unemployment taxes, disabilitytaxes, the Employee Stock Purchase Plan, amounts due under 401(k) plan,officer’s salaries, travel & entertainment reimbursement accrual, long termdisability and life insurance, dental expense accrual, medical insurance, salestax, GST, sales commissions payable and accrued professional fees.

 

“Excluded Taxes”means (i) all Income Taxes owed by the Seller or any of its Affiliates for anyperiod; (ii) all Taxes relating to the Excluded Assets or Excluded Liabilitiesfor any period; (iii) all Taxes relating to the Purchased Assets, the Businessor the Assumed Liabilities for any Pre-Closing Tax Period; (iv) all Taxes ofSeller or any other Person by reason of being a member of a consolidated,combined, unitary or affiliated group that includes the Seller or any of itspresent or past Affiliates prior to the Closing, by reason of a tax sharing,tax indemnity or similar agreement entered into by the Seller or any of itspresent or past Affiliates prior to the Closing (other than this Agreement) orby reason of transferee or successor liability arising in respect of a transactionundertaken by the Seller or any of its present or past Affiliates prior to theClosing; and (v) Taxes imposed on Purchaser as a result of any breach ofwarranty or misrepresentation under Section 3.25 hereof, or breach by theSeller of any covenant relating to Taxes. For purposes of this Agreement, in the case of any Straddle Period, (i)Property Taxes relating to the Purchased Assets allocable to the Pre-ClosingTax Period shall be equal to the amount of such Property Taxes for the entireStraddle Period multiplied by a fraction, the numerator of which is the numberof days during the Straddle Period that fall within the Pre-Closing Tax Periodand the denominator of which is the number of days in the entire StraddlePeriod, and (ii) Taxes (other than Property Taxes) relating to the PurchasedAssets for the Pre-Closing Tax Period shall be computed as if such taxableperiod ended as of the close of business on the date of the Closing.

 

“Final Net Working Capital Balance” means theNet Working Capital Balance as reflected on the Closing Statement of Net Assetsthat is deemed final pursuant to Section 2.07(c), as adjusted so that the valueof the Inventory shall be as set forth on the Closing Statement of Inventorythat is deemed final pursuant to Section 2.07(c).

 

“GAAP” means United States generally acceptedaccounting principles applied on a basis consistent with past practices andprocedures for interim and year end financial statements of the Seller (foravoidance of doubt, in connection with the preparation of the Closing Statementof Net Assets, the accountants, in preparing such statement in accordance withGAAP, shall have the ability to consider events and circumstances occurringsubsequent to the Closing (but only if those events or circumstances occurredprior to the date of the report of the Seller’s Accountants delivered pursuantto Section 2.07(a)).

 

“Governmental Authority” means any federal,national, supranational, state, provincial, local, or similar government,governmental, regulatory or administrative authority, agency or commission orany court, tribunal, or judicial or arbitral body.

 

“Governmental Order” means any order, writ,judgment, injunction, decree, stipulation, determination or award entered by orwith any Governmental Authority.

 

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“Hazardous Materials” means (a) petroleum andpetroleum products, radioactive materials, asbestos-containing materials, ureaformaldehyde foam insulation, transformers or other equipment that contain polychlorinatedbiphenyls and radon gas, (b) any other chemicals, materials or substancesdefined as or included in the definition of “hazardous substances”, “hazardouswastes”, “hazardous materials”, “extremely hazardous wastes”, “restrictedhazardous wastes”, “toxic substances”, “toxic pollutants”, “contaminants” or“pollutants”, or words of similar import, under any applicable EnvironmentalLaw, and (c) any other chemical, material or substance which is regulatedby any Environmental Law.

 

“HSR Act” means the Hart-Scott-Rodino AntitrustImprovements Act of 1976, as amended, and the rules and regulations promulgatedthereunder.

 

“Income Taxes”means Taxes imposed on or measured by reference to gross or net income orreceipts, and franchise, net worth, capital or other doing business Taxes.

 

“Indebtedness” means, with respect to anyPerson, (a) all indebtedness of such Person, whether or not contingent,for borrowed money, (b) all obligations of such Person for the deferredpurchase price of property or services, (c) all obligations of such Personevidenced by notes, bonds, debentures or other similar instruments,(d) all indebtedness created or arising under any conditional sale orother title retention agreement with respect to property acquired by such Person(even though the rights and remedies of the seller or lender under suchagreement in the event of default are limited to repossession or sale of suchproperty), (e) all obligations of such Person as lessee under leases thathave been or should be, in accordance with GAAP, recorded as capital leases,(f) all obligations, contingent or otherwise, of such Person underbanker’s acceptance, letter of credit or similar facilities, (g) allobligations of such Person to purchase, redeem, retire, defease or otherwiseacquire for value any capital stock of such Person or any warrants, rights oroptions to acquire such capital stock, valued, in the case of redeemablepreferred stock, at the greater of its voluntary or involuntary liquidationpreference plus accrued and unpaid dividends, (h) all Indebtedness ofothers referred to in clauses (a) through (g) above guaranteed directly orindirectly in any manner by such Person, or in effect guaranteed directly orindirectly by such Person through an agreement (i) to pay or purchase suchIndebtedness or to advance or supply funds for the payment or purchase of suchIndebtedness, (ii) to purchase, sell or lease (as lessee or lessor)property, or to purchase or sell services, primarily for the purpose ofenabling the debtor to make payment of such Indebtedness or to assure theholder of such Indebtedness against loss, (iii) to supply funds to or inany other manner invest in the debtor (including any agreement to pay forproperty or services irrespective of whether such property is received or suchservices are rendered) or (iv) otherwise to assure a creditor againstloss, and (i) all Indebtedness referred to in clauses (a) through (g)above secured by (or for which the holder of such Indebtedness has an existingright, contingent or otherwise, to be secured by) any Encumbrance on property(including accounts and contract rights) owned by such Person, even though suchPerson has not assumed or become liable for the payment of such Indebtedness.

 

“Indemnified Party” means a PurchaserIndemnified Party or a Seller Indemnified Party, as the case may be.

 

“Indemnifying Party” means the Seller andAudiovox, on a joint and several basis, pursuant toSection 8.02 or the Purchaser pursuant to Section 8.03, as the case may be.

 

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“Intellectual Property” means (a) Patents,(b) Trademarks, (c) Copyrights, (d) Trade Secrets and(e) Software.

 

“Inter-company Payables” means amounts owed bythe Seller to Audiovox or any subsidiaries, divisions, or affiliates ofAudiovox as determined in accordance with GAAP.

 

“Interim Milestones” means (i) the developmentof the written policies and procedures, including the control matrices based onthe Purchaser’s standard template for such matrices, constituting the ACCInternal Reporting Controls, (ii) the preliminary testing/walk-through by thePurchaser’s Reporting Controls Advisors of the implemented ACC InternalReporting Controls, (iii) the remediation of any ACC Internal ReportingControls not in compliance with Section 404 and (iv) the subsequenttesting/walk-through by the Purchaser’s Reporting Controls Advisors of theimplemented ACC Internal Reporting Controls.

 

“Interim Statement Date” means February 29,2004.

 

“Interim Statement of Net Assets” means thestatement of Net Assets (including a calculation of the Net Working CapitalBalance) of the Business, dated as of February 29, 2004, a copy of which is setforth in Section 3.04(a)(i) of the DisclosureSchedule.

 

“Inventories” means all inventory, merchandise,finished goods, raw materials, packaging, labels, supplies and other personalproperty used in the Business and maintained, held or stored by or for theSeller, and any prepaid deposits for any of the same.  Inventories are valued at the lower of theactual cost to purchase (primarily on a weighted moving average basis) and/orthe current estimated market value of the inventory less expected costs to sellthe inventory, as determined in accordance with GAAP.

 

“IRS” means the Internal Revenue Service of theUnited States.

 

“Law” means any federal, national,supranational, state, provincial, local or similar statute, law, ordinance,regulation, rule, code, order, requirement or rule of law (including commonlaw).

 

“Leased Real Property” means the real propertyused in the Business leased by the Seller, as tenant, together with, to theextent leased by the Seller and used in the Business, all buildings and otherstructures, facilities or improvements located thereon, all fixtures, systems,equipment and items of personal property of the Seller attached or appurtenantthereto and all easements, licenses, rights and appurtenances relating to theforegoing.

 

“Liabilities” means any and all debts,liabilities and obligations, whether accrued or fixed, absolute or contingent,matured or unmatured or determined or determinable, including those arisingunder any Law (including any Environmental Law), Action or Governmental Orderand those arising under any contract, agreement, arrangement, commitment orundertaking.

 

“Licensed Intellectual Property” meansIntellectual Property licensed to the Seller pursuant to the Transferred IPAgreements.

 

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“Material Adverse Effect” means anycircumstance, change in or effect on the Business or the Seller that,individually or in the aggregate with all other circumstances, changes in oreffects on the Business or the Seller is or is reasonably likely to bematerially adverse to the business, operations, assets or liabilities (includingcontingent liabilities), results of operations or the financial condition ofthe Business; provided, however, that (v) effects attributable togeneral or industry specific economic conditions, except those effects thatadversely affect the Business or the Seller to a materially greater extent thanthey affect other entities operating in such industries, (w) a termination ofthe supply arrangement between the Seller and Curitel, (x) a decline in themarket price of Audiovox common stock, in itself, (y) the failure, in itself,to achieve estimated or projected results of the Business (provided, that, anycircumstances, change or effect on the Business giving rise to such failure toachieve estimated or projected results may constitute a Material AdverseEffect) and (z) changes resulting from the permitted disclosure of thisAgreement or the transactions contemplated hereby, in each case, shall notconstitute a Material Adverse Effect.

 

“Net Assets” means the difference between (a)the sum of  Inventories,Prepaids and other Current Assets, Property, Plant and Equipment, and OtherLong-Term Assets included in the Purchased Assets and (b) the sum of thirdparty Accounts Payable, Accrued Expenses, Accrued Sales Incentives, DocumentaryAcceptances and Other Long-Term Liabilities (excluding long-term notes payableto Toshiba), other than the Excluded Liabilities, as determined in accordancewith GAAP.

 

“Net Working Capital Balance” means thedifference between (a) the sum of Inventories and Prepaids and other CurrentAssets, and (b) the sum of third-party Accounts Payable, Accrued Expenses,Accrued Sales Incentives and Documentary Acceptances, of the Business.

 

“Other Long-Term Assets” means the value ofnon-cash assets of the Business not due within one year as determined inaccordance with GAAP.

 

“Other Long-Term Liabilities” means notes andother amounts payable to third parties, including vendors, arising from theconduct of the Business, whether or not in the ordinary course, together withany unpaid financing charges accrued thereon not due within one year asdetermined in accordance with GAAP.

 

“Owned Intellectual Property” meansIntellectual Property owned by the Seller and used in the Business as set forthin Section 3.15(a) of the Disclosure Schedule.

 

“Owned Real Property” means the real propertyin which the Seller has fee title (or equivalent) interest that is used in theBusiness, together with all buildings and other structures, facilities orimprovements currently or hereafter located thereon, all fixtures, systems,equipment and items of personal property of the Seller that are used in theBusiness attached or appurtenant thereto and all easements, licenses, rightsand appurtenances relating to the foregoing.

 

“Patents” means United States, foreign andinternational patents, patent applications and statutory inventionregistrations, including reissues, divisions, continuations,

 

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continuations-in-part,extensions and reexaminations thereof, and all rights therein provided byinternational treaties and conventions.

 

“Per Customer Amount” means the aggregateamount of Receivables owed by each Customer to the Seller, net of theReceivables Reserve for such Customer.

 

“Permitted Encumbrances” means such of thefollowing as to which no enforcement, collection, execution, levy orforeclosure proceeding shall have been commenced and as to which the Seller isnot otherwise subject to civil or criminal liability due to its existence:  (a) liens for Taxes not yet due andpayable, for which adequate reserves have been maintained in accordance withGAAP, (b) Encumbrances imposed by Law, such as materialmen’s, mechanics’,carriers’, workmen’s and repairmen’s liens and other similar liens arising inthe ordinary course of business securing obligations that (i) are notoverdue for a period of more than 30 days and (ii) are not in excess of$5,000 in the case of a single property or $50,000 in the aggregate at anytime; (c) pledges or deposits to secure obligations under workers’compensation laws or similar legislation or to secure public or statutoryobligations; and (d) minor survey exceptions, reciprocal easementagreements and other customary encumbrances on title to real property that(i) were not incurred in connection with any Indebtedness, (ii) donot render title to the property encumbered thereby unmarketable and(iii) do not, individually or in the aggregate, materially adverselyaffect the value of or the use of such property for its current purposes.

 

“Person” means any individual, partnership,firm, corporation, limited liability company, association, trust,unincorporated organization or other entity, as well as any syndicate or groupthat would be deemed to be a person under Section 13(d)(3) of the SecuritiesExchange Act of 1934, as amended.

 

 “Post-Closing Tax Period” means anytaxable period (or portion thereof) beginning after the date of the Closing.

 

“Pre-Closing TaxPeriod” means any taxable period (or portion thereof) ending on or prior tothe date of the Closing.

 

“Preliminary NetWorking Capital Balance” means the difference between (a) the sum ofInventories and Prepaids and other Current Assets, and (b) the sum ofthird-party Accounts Payable, Accrued Expenses, Accrued Sales Incentives and DocumentaryAcceptances, of the Business.

 

“Preliminary Statementof Net Assets” means the statement of Net Assets of the Business as of theclose of business on the date of the Closing, which shall include thePreliminary Net Working Capital Balance, prepared in good faith by the Sellerin consultation with the Seller’s Accountants and certified by an officer ofthe Seller.

 

“Prepaids and otherCurrent Assets” means either (i) pre-payments madeto vendors of the Business related to operating costs, which have not been usedand (ii) the value of non-cash assets used in the Business due within one yearas determined in accordance with GAAP.

 

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“Property, Plant andEquipment” means physical assets including, without limitation, furniture,fixtures, displays, machinery and equipment, computer hardware and software andautomobiles, owned by the Seller and used in the Business, as determined inaccordance with GAAP.

 

“Property Taxes”means real and personal ad valorem property Taxes and any other Taxes imposedon a periodic basis and measured by the value of any item.

 

“Purchase Price Bank Account” means a bankaccount in the United States to be designated by the Seller in a written noticeto the Purchaser at least two Business Days before the Closing.

 

“Purchaser Material Adverse Effect” means anycircumstance, change in or effect on the Purchaser that, individually or in theaggregate with all other circumstances, changes in or effects on thePurchaser is or is reasonably likely to be materially adverse to thebusiness, operations, assets or liabilities (including contingent liabilities),results of operations or the financial condition of the Purchaser; provided,however, that (x) effects attributable to general or industry specificeconomic conditions, except those effects that adversely affect the Purchaserto a materially greater extent than they affect other entities operating insuch industries, (y) a decline in the market price of the Purchaser commonstock, in itself, (z) changes resulting from the permitted disclosure of thisAgreement or the transactions contemplated hereby, in each case, shall notconstitute a Purchaser Material Adverse Effect.

 

“Purchaser’s Accountants” meansPricewaterhouseCoopers LLP, independent accountants of the Purchaser.

 

“Purchaser’s Reporting Controls Advisors” meansa West-Coast based team of advisors from Deloitte & Touche LLP.

 

“Receivables” means any and all accountsreceivable, notes and other amounts receivable from third parties, includingVendors, customers and employees, arising from the conduct of the Business,whether or not in the ordinary course, together with any unpaid financingcharges accrued thereon, as determined in accordance with GAAP.

 

“Receivables Listing” means a computer filecontaining a list setting forth all outstanding Receivables of the Business asof 5:30 p.m. EST on the date of the Closing, including the name of the Customerthat owes the Receivable to the Seller, the Per Customer Amount owed by each Customerand an invoice number or other information identifying each Receivablethereon.  The Receivables Listing shallnot include any Vendor Receivables.

 

“Receivables Reserve” means the reserve for theReceivables on a Customer-by-Customer basis set forth in the ReceivablesListing, determined in accordance with GAAP, which amount shall be deemed to bethe amount of the Receivables Reserve set forth on the Receivables Listing,unless and until such amount is determined to be otherwise in accordance with Section2.07(c).

 

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“Regulations” means the Treasury Regulations(including Temporary Regulations) promulgated by the United States Departmentof Treasury with respect to the Code or other federal tax statutes.

 

“Release” means disposing, discharging,injecting, spilling, leaking, leaching, dumping, emitting, escaping, emptying,seeping, placing and the like into or upon any land or water or air orotherwise entering into the Environment.

 

“Remedial Action” means all action to(a) clean up, remove, treat or handle in any other way Hazardous Materialsin the Environment; (b) prevent the Release of Hazardous Materials so thatthey do not migrate, endanger or threaten to endanger public health or the Environment;or (c) perform remedial investigations, feasibility studies, correctiveactions, closures and post-remedial or post-closure studies, investigations,operations, maintenance and monitoring.

 

“Reporting Policies and Procedures” meanspolicies and procedures that (i) pertain to the maintenance of records that inreasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Purchaser or the Business, as applicable (ii)provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with GAAP, and thatreceipts and expenditures of the Purchaser or the Business, as applicable, arebeing made only in accordance with authorizations of management and directorsof the Purchaser or of the Seller, as applicable and (iii) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition,use or disposition of the assets of the Purchaser or the Business, asapplicable, that could have a material effect on the financial statements.

 

“SEC” means the Securities and ExchangeCommission.

 

“Section 404” means Section 404 of theSarbanes-Oxley Act of 2002.

 

“Seller’s Accountants” means Grant ThorntonLLP, independent accountants of the Seller.

 

“Seller’s Prior Accountants” means KPMG LLP,prior independent accountants of the Seller.

 

“Seller’s Reporting Controls Advisors” means anEast-Coast based team of advisors from Deloitte & Touche LLP.

 

“Shared MIS Systems” means the Software andhardware owned or licensed by Audiovox and which is used by the Seller in theoperation of the Business, as set forth in Section 1.01 of the DisclosureSchedule.

 

“Software” means computer software, programsand databases in any form, including Internet web sites, web content and links,source code, object code, operating systems and specifications, data,databases, database management code, utilities, graphical user interfaces,menus, images, icons, forms, methods of processing, software engines, platformsand

 

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dataformats, all versions, updates, corrections, enhancements and modificationsthereof, and all related documentation, developer notes, comments andannotations.

 

“Straddle Period”means any taxable period beginning on or prior to and ending after the date ofthe Closing.

 

“Tax” or “Taxes” means any and alltaxes, fees, levies, duties, tariffs, imposts, and other charges of any kind(together with any and all interest, penalties, additions to tax and additionalamounts imposed with respect thereto) imposed by any government or taxingauthority, including taxes or other charges on or with respect to income,franchises, windfall or other profits, gross receipts, property, sales, use,capital stock, payroll, employment, social security, workers’ compensation,unemployment compensation, or net worth; taxes or other charges in the natureof excise, withholding, ad valorem, stamp, transfer, value added, or gainstaxes; license, registration and documentation fees; and customs’ duties,tariffs, and similar charges.

 

“Tax Return” means any return, declaration,report, election, claim for refund or information return or other statement orform filed or required to be filed with any Governmental Authority relating toTaxes, including any schedule or attachment thereto or any amendment thereof.

 

“Trade Secrets” means trade secrets, know-howand other confidential or proprietary technical, business and otherinformation, including manufacturing and production processes and techniques,research and development information, technology, drawings, specifications,designs, plans, proposals, technical data, financial, marketing and businessdata, pricing and cost information, business and marketing plans, customer andsupplier lists and information, and all rights in any jurisdiction to limit theuse or disclosure thereof.

 

“Trademarks” means trademarks, service marks,trade dress, logos, trade names, corporate names, URL addresses, domain namesand symbols, slogans and other indicia of source or origin, including thegoodwill of the business symbolized thereby or associated therewith, common lawrights thereto, registrations and applications for registration thereofthroughout the world, all rights therein provided by international treaties andconventions, and all other rights associated therewith.

 

“Transferred IP Agreements” means(a) licenses of Owned Intellectual Property by the Seller to thirdparties, (b) licenses of Intellectual Property by third parties to theSeller and used in the Business (c) agreements between the Seller and thirdparties relating to the development or use of Intellectual Property, thedevelopment or transmission of data, or the use, modification, framing, linkingadvertisement, or other practices with respect to Internet web sites, in eachcase, that are used in the Business and (d) consents, settlements, decrees,orders, injunctions, judgments or rulings governing the use, validity orenforceability of Owned Intellectual Property, as set forth in Section 3.15(a) of the Disclosure Schedule.

 

“UTSI’s Internal Reporting Controls” means theprocess of internal financial reporting controls, including certain controlmatrices, developed by and in the process of being implemented by the Purchaserto provide reasonable assurance regarding the reliability of

 

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financialreporting and the preparation of financial statements for external purposes inaccordance with GAAP, including the Reporting Policies and Procedures, incompliance with Section 404.

 

“Vendors” means any and allvendors who are unaffiliated with the Seller and who supply rawmaterials, components, spare parts, supplies, goods, merchandise or services tothe Seller (as such relate to the Business).

 

SECTION 1.02. Definitions.  The following terms have the meanings setforth in the Sections set forth below:

 
| **Definition**                                     | ** ** | **Location**  |
|----------------------------------------------------|------------|---------------|
|                                               |       |          |
| “555 Wireless  Sublease”                 |       | 7.02(i)(i)    |
| “AAA”                                    |       | 10.09         |
| “Additional Reserved  Receivables”       |       | 2.07(d)       |
| “Adjusted Target NWCB”                   |       | 2.07(c)(i)(B) |
| “Agreement”                              |       | Preamble      |
| “Allocation”                             |       | 2.03(b)       |
| “Ancillary Lease  Documents”             |       | 3.16(d)       |
| “Assumed Contracts”                      |       | 2.01(a)(xi)   |
| “Assumed Liabilities”                    |       | 2.02(a)       |
| “Audiovox Board”                         |       | 3.30(a)       |
| “Audiovox Recommendation”                |       | 5.19(b)       |
| “Audiovox  Stockholders’ Meeting”   |       | 5.19(a)       |
| “Audiovox Triggering  Event”             |       | 9.01          |
| “Business”                               |       | Recitals      |
| “Cerritos Lease”                         |       | 7.02(i)(ii)   |
| “Change in the  Audiovox Recommendation” |       | 5.06(c)       |
| “Claims”                                 |       | 2.01(a)(ix)   |
| “Closing”                                |       | 2.04          |
| “Collection Period”                      |       | 2.09(d)       |
| “Competing  Transaction”                 |       | 5.06(d)       |
| “Consent Costs”                          |       | 5.04(e)       |
| “Disputed Receivable”                    |       | 2.09(a)       |
| “Employee Amounts”                       |       | 6.02          |
| “Employment  Agreements”                 |       | Recitals      |
| “ERISA”                                  |       | 3.21(a)       |
| “Escrow Agreement”                       |       | 2.08          |
| “Excluded Assets”                        |       | 2.01(b)       |
| “Excluded  Intellectual Property”        |       | 2.01(b)(vii)  |
| “Excluded  Liabilities”                  |       | 2.02(b)       |
| “Expense  Reimbursement”                 |       | 9.01(b)       |
| “Expenses”                               |       | 9.03(a), (c)  |
| “Fee”                                    |       | 9.03(b)       |
| “Financial  Statements”                  |       | 3.04(a)(ii)   |

 

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| **Definition**                                    | ** ** | **Location**  |
|---------------------------------------------------|------------|---------------|
|                                              |       |          |
| “Independent  Accounting Firm”          |       | 2.07(b)(ii)   |
| “Initial Termination  Date”             |       | 9.01(b)       |
| “Interim Financial  Statements”         |       | 3.04(a)(iii)  |
| “Key Employees”                         |       | 7.02(g)       |
| “Lease”                                 |       | 3.16          |
| “Loss”                                  |       | 8.02          |
| “Material Contracts”                    |       | 3.14(a)       |
| “Notice of Superior  Proposal”          |       | 5.06(c)       |
| “Options”                               |       | 3.16(c)       |
| “Plans”                                 |       | 3.21(a)       |
| “PRC Antitrust  Approvals”              |       | 7.01(b)       |
| “Proxy Statement”                       |       | 5.19(a)       |
| “Preliminary  Purchase Price Increase”  |       | 2.07(C)(i)(B) |
| “Preliminary  Purchase Price Reduction” |       | 2.07(C)(i)(K) |
| “Purchase Price”                        |       | 2.03(a)       |
| “Purchased Assets”                      |       | 2.01(a)       |
| “Purchaser”                             |       | Preamble      |
| “Purchaser  Indemnified Party”          |       | 8.02          |
| “Replication Service”                   |       | 5.22          |
| “Restricted Period”                     |       | 5.08(a)       |
| “Seller”                                |       | Preamble      |
| “Seller Indemnified  Party”             |       | 8.03          |
| “Stockholder”                           |       | Recitals      |
| “Superior Proposal”                     |       | 5.06(e)       |
| “Tangible Personal  Property”           |       | 3.17(a)       |
| “Target NWCB”                           |       | 2.07(C)(i)    |
| “Third Party Claim”                     |       | 8.05(b)       |
| “Trademark License  Agreement”          |       | 5.20          |
| “Transferred  Employee”                 |       | 6.01          |
| “Transition Services  Agreement”        |       | 5.13          |
| “Voting Agreement”                      |       | Recitals      |

 

SECTION 1.03. Interpretation and Rules of Construction.  In this Agreement, except to the extentotherwise provided or that the context otherwise requires:

 

#### (a)                                  when a reference is made in this Agreement to an Article,Section, Exhibit or Schedule, such reference is to an Article or Section of, ora Schedule or Exhibit to, this Agreement unless otherwise indicated;

####  

#### (b)                                 thetable of contents and headings for this Agreement are for reference purposesonly and do not affect in any way the meaning or interpretation of thisAgreement;

####  

#### (c)                                  wheneverthe words “include,” “includes” or “including” are used in this Agreement, theyare deemed to be followed by the words “without limitation”;

 

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#### (d)                                 the words “hereof,” “herein” and “hereunder” and words ofsimilar import, when used in this Agreement, refer to this Agreement as a wholeand not to any particular provision of this Agreement;

####  

#### (e)                                  all terms defined in this Agreement have the definedmeanings when used in any certificate or other document made or deliveredpursuant hereto, unless otherwise defined therein;

####  

#### (f)                                    the definitions contained in this Agreement are applicableto the singular as well as the plural forms of such terms;

####  

#### (g)                                 anyLaw defined or referred to herein or in any agreement or instrument that isreferred to herein means such Law or statute as from time to time amended,modified or supplemented, including by succession of comparable successor Laws;

####  

#### (h)                                 references to a Person are also to its successors andpermitted assigns; and

####  

#### (i)                                     the use of “or” is not intended to be exclusive unlessexpressly indicated otherwise.

####  

# ARTICLE IIPURCHASE AND SALE

 

SECTION 2.01. Purchase and Sale of Purchased Assets.  (a) Upon the terms and subject to the conditions of this Agreement, at theClosing, the Seller shall sell, assign, transfer, convey and deliver, or causeto be sold, assigned, transferred, conveyed and delivered, to the Purchaser,and the Purchaser shall purchase from the Seller, the Seller’s right, title andinterest at the Closing in and to the following (the assets to be purchased bythe Purchaser, together with the covenants contained in Section 5.08, beingreferred to as the “Purchased Assets”):

 

##### (i)                                     all rights in respect of the Leased Real Property;

#####  

##### (ii)                                  all Property, Plant and Equipment;

#####  

##### (iii)                               all vehicles and rolling stock used  in the Business;

#####  

##### (iv)                              all Inventories;

#####  

##### (v)                                 allbooks of account, general, financial, and personnel records, invoices, shippingrecords, supplier lists, correspondence and other documents, records and filesand any rights thereto which are owned, or employed by the Seller primarily inconnection with the Business except for (x) organization documents, minute andstock record books, stock certificates and the corporate seal of the Seller and(y) those relating to the Excluded Assets or the Excluded Liabilities(including all records relating to Taxes);

#####  

##### (vi)                              the goodwill relating to the Business;

 

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##### (vii)                           allthe Seller’s right, title and interest in, to and under the Owned IntellectualProperty and the Licensed Intellectual Property, copies and tangibleembodiments thereof in whatever form or medium, and all rights to sue andrecover damages for past, present and future infringement, dilution,misappropriation, violation, unlawful imitation or breach thereof;

#####  

##### (viii)                        allclaims, causes of action, choses in action, rights of recovery and rights ofsetoff of any kind (including rights to insurance proceeds and rights under andpursuant to all warranties, representations and guarantees made by suppliers ofproducts, materials, or equipment, or components thereof), related to theBusiness pertaining to, arising out of and inuring to the benefit of the Seller(“Claims”) including those reasonably necessary or desirable to enforcesuch rights against third parties or to defend against those seeking to enforcethe Assumed Liabilities; except those Claims which are related to the ExcludedLiabilities or the Excluded Assets;

#####  

##### (ix)                                all sales and promotional literature, customer lists andother sales-related materials of the Seller used in the Business;

#####  

##### (x)                                   allrights of the Seller under the contracts, licenses, sublicenses, agreements,leases, commitments, and sales and purchase orders, and under all bids andoffers related to the Business set forth on Section 2.01(a)(x) of theDisclosure Schedule (the “Assumed Contracts”);

#####  

##### (xi)                                allmunicipal, state and federal franchises, permits, licenses, agreements, waiversand authorizations held or used by the Seller in connection with, or requiredfor, the Business, to the extent transferable;

#####  

##### (xii)                             allthe Seller’s right, title and interest at the Closing in, to and under allother assets, rights and claims of every kind and nature directly or indirectlyowned by the Seller or to which the Seller is directly or indirectly entitled,in each case, used in the operation of, or residing with, the Business;

#####  

##### (xiii)                          Prepaidsand Other Current Assets;

#####  

##### (xiv)                         OtherLong-Term Assets;

#####  

##### (xv)                            AllAudiovox’s rights, title and interest in the Shared MIS Systems; and

#####  

(xvi)                         All the Seller’sor Audiovox’s rights, title and interest in the replicated copy of theDeveloped Software replicated in accordance with Section 5.22.

 

### (b)                                 Notwithstandinganything in Section 2.01(a) to the contrary, the Purchased Assets shall excludethe following assets and properties owned by the Seller (the “ExcludedAssets”):

###  

##### (i)                                     cash and marketable securities and all bank accounts of theSeller relating to the Business;

 

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##### (ii)                                  the Purchase Price Bank Account;

#####  

##### (iii)                               all rights of the Seller under this Agreement and theAncillary Agreements;

#####  

##### (iv)                              TaxReturns of the Seller (and related workpapers);

#####  

##### (v)                                 except as provided in Section 5.18(a), all Tax refunds ofthe Seller;

#####  

##### (vi)                              Trademarksowned by Audiovox or Toshiba, or their respective employees, Affiliates (otherthan the Seller), successors or assigns;

#####  

##### (vii)                           TheIntellectual Property set forth in Section 2.01(b)(vii)of the Disclosure Schedule (the “Excluded Intellectual Property”);

#####  

##### (viii)                        all Receivables of the Business as of 5:30 p.m. EST on thedate of the Closing;

#####  

##### (ix)                                all furniture and other tangible property used by, and inthe office of, John Shalam on the date of Closing;

#####  

##### (x)                                   allClaims, including Claims arising under insurance policies, related to theExcluded Liabilities or Excluded Assets, including those reasonably necessaryor desirable to enforce rights against third parties or defend against thoseseeking to enforce Excluded Liabilities;

#####  

##### (xi)                                all rights against Compal Electronics, Inc. relating toactions occurring prior to Closing;

#####  

##### (xii)                             any rights, software or other license or practices withrespect to websites, internet addresses or domain names used in connection withthe Business;

#####  

##### (xiii)                          the equity interests in the Seller and those entities setforth in Section 3.01(c) of the Disclosure Schedule;

#####  

##### (xiv)                         organizationdocuments, minute and stock record books, stock certificates and the corporateseal of the Seller and those entities set forth in Section 3.01(c) of theDisclosure Schedule; and

#####  

##### (xv)                            all books of account, general, financial and personnelrecords, invoices, correspondence and other documents relating exclusively tothe Excluded Assets and the Excluded Liabilities (including all recordsrelating to Taxes).

#####  

SECTION 2.02. Assumption and Exclusion of Liabilities.  (a) Upon the terms and subject to the conditions of this Agreement, at theClosing, the Purchaser shall assume and shall agree to pay, perform anddischarge the following Liabilities of the Seller, except for the ExcludedLiabilities (the “Assumed Liabilities”):

 

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##### (i)                                     all Liabilities reflected or reserved against on the ClosingStatement of Net Assets (other than Tax Liabilities);

#####  

##### (ii)                                  allLiabilities of the Seller arising under the Assumed Contracts (other thanLiabilities or obligations attributable to (A) any failure by the Seller tocomply with the terms thereof prior to the Closing, (B) products liability orpersonal injury claims arising prior to the Closing and (C) intellectualproperty infringement claims arising prior to the Closing); and

#####  

##### (iii)                               product warranties and claims thereunder relating to theproducts of the Business.

#####  

### (b)                                 Notwithstandingsubsection (a) above, the Seller shall retain, and shall be responsible forpaying, performing and discharging when due, and the Purchaser shall not assumeor have any responsibility for, all Liabilities of the Seller as of the Closingother than the Assumed Liabilities (the “Excluded Liabilities”),including, without limitation:

###  

##### (i)                                     all Excluded Taxes;

#####  

##### (ii)                                  all Liabilities relating to or arising out of the ExcludedAssets;

#####  

##### (iii)                               claims arising prior to the Closing made by employees of theSeller (including the Transferred Employees) relating to their employment withthe Seller;

#####  

##### (iv)                              all Inter-company Payables;

#####  

##### (v)                                 allLiabilities or obligations attributable to (A) any failure by the Seller tocomply with the terms of any Assumed Contract prior to the Closing, (B)products liability or personal injury claims arising prior to the Closing and(C) intellectual property infringement claims arising prior to the Closing; and

#####  

(v)                                 allLiabilities pursuant to Environmental Law arising from or related to anyaction, event, circumstance or condition related to the Business or the LeasedReal Property, in each case occurring or existing on or before the Closing,including:  (A) any Release of anyHazardous Material into the Environment on or before the Closing at, to or fromthe Leased Real Property or any property formerly owned, leased, used oroccupied by the Business (and any additional migration of such HazardousMaterial after the Closing); (B) any transportation, disposal ordischarge, or the arrangement for such activities, on or before the Closing, ofany Hazardous Material originating at the Leased Real Property or any propertyformerly owned, leased, used or occupied by the Business to or at any location(and any additional transportation, disposal or discharge of such HazardousMaterial after the Closing); and (C) any noncompliance with or violationof any applicable Environmental Law or Environmental Permit relating in any wayto the Business on or before the Closing (and any continuation of suchnoncompliance or violation after the Closing).

 

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SECTION 2.03. Purchase Price; Allocation of Purchase Price.  (a) Subject to the adjustments set forth in Section 2.07, the purchase pricefor the Purchased Assets shall be $165,100,000 (the “Purchase Price”).

 

### (b)                                 ThePurchaser and the Seller shall, in good faith, use reasonable commercialefforts to, within 120 days after the date of Closing, reach an agreement as tothe allocation of the sum of the Purchase Price and the Assumed Liabilitiesamong the Purchased Assets (including the assets in Canada) (the “Allocation”).  Any subsequent adjustments to the sum of thePurchase Price and Assumed Liabilities shall be reflected in the Allocation ina manner consistent with Section 1060 of the Code and the Regulationsthereunder.  If the Purchaser and theSeller have agreed on an Allocation, then the Purchaser and the Seller shalleach file IRS Form 8594 consistent with the Allocation and neither the Sellernor the Purchaser will take any position inconsistent therewith in any Tax Return,in any refund claim, in any litigation, or otherwise.  If the Purchaser and the Seller cannot agreeon an Allocation, each party may report an Allocation that, in its solediscretion, is consistent with Section 1060 of the Code and the Regulations thereunder.

###  

SECTION 2.04. Closing. Subject to the terms and conditions of this Agreement, the sale andpurchase of the Purchased Assets and the assumption of the Assumed Liabilitiescontemplated by this Agreement shall take place at a closing (the “Closing”)to be held at the offices of Shearman & Sterling LLP, 599 Lexington Avenue,New York, New York at 1:30 P.M. New York time on the second Business Dayfollowing the satisfaction or waiver of all conditions to the obligations ofthe parties set forth in Section 7.01 and Section 7.02 (other than conditionswith respect to actions the respective parties will take at the Closing itself,but subject to the satisfaction of those conditions) or at such other place orat such other time or on such other date as the Seller and the Purchaser maymutually agree upon in writing.

 

SECTION 2.05. Closing Deliveries by the Seller.  At the Closing, Audiovox (as to items (e),(g) and (i)) or the Seller shall deliver or cause to be delivered to thePurchaser:

 

#### (a)                                  theAssumption Agreement, the Bill of Sale, the Assignment of IntellectualProperty, each Assignment of Lease, the Trademark License Agreement and suchother instruments, in form and substance reasonably satisfactory to thePurchaser, as may be reasonably requested by the Purchaser to transfer thePurchased Assets to the Purchaser or evidence such transfer on the publicrecords, which request shall be provided to the Seller at least five (5) daysbefore the Closing;

####  

#### (b)                                 executed counterparts of each Ancillary Agreement to whichthe Seller is a party other than the Ancillary Agreements delivered pursuant toSection 2.05(a);

####  

#### (c)                                  a receipt for the Purchase Price less the Escrow Amount;

####  

#### (d)                                 atrue and complete copy, certified by the Secretary or an Assistant Secretary ofthe Seller, of the resolutions duly and validly adopted by the Board ofDirectors of the Seller evidencing its authorization of the execution anddelivery of this Agreement and the Ancillary Agreements and the consummation ofthe transactions contemplated hereby and thereby;

 

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#### (e)                                  trueand complete copies, certified by the Secretary or an Assistant Secretary ofAudiovox of the resolutions duly and validly adopted by the Board of Directorsof Audiovox, evidencing its authorization of the execution and delivery of thisAgreement and the consummation of the transactions contemplated hereby;

####  

#### (f)                                    acertificate of the Secretary or an Assistant Secretary of the Seller certifyingthe names and signatures of the officers of the Seller authorized to sign thisAgreement and the Ancillary Agreements and the other documents to be deliveredhereunder and thereunder;

####  

#### (g)                                 certificates of the Secretary or an Assistant Secretary ofAudiovox certifying the names and signatures of the officers of Audiovoxauthorized to sign this Agreement and the other documents to be deliveredhereunder;

####  

#### (h)                                 a certificate of a duly authorized officer of the Sellercertifying as to itself as to the matters set forth in Section 7.02(a);

####  

#### (i)                                     a certificate of a duly authorized officer of Audiovoxcertifying as to itself as to the matters set forth in Section 7.02(a); and

####  

#### (j)                                     a certificate of non-foreign status (in a form reasonablyacceptable to Purchaser) pursuant to section 1.1445-2(b)(2) of the Regulations.

####  

SECTION 2.06. Closing Deliveries by the Purchaser.  (a)  Atthe Closing, the Purchaser shall deliver to the Seller:

 

##### (i)                                     the Purchase Price and the $70,000 contemplated by Section5.22 hereof, less the Escrow Amount, by wire transfer in immediately availablefunds to the Purchase Price Bank Account;

#####  

##### (ii)                                  executed counterparts of the Assumption Agreement, eachAssignment of Lease, the Assignment of Intellectual Property and the TrademarkLicense Agreement;

#####  

##### (iii)                               executedcounterparts of each Ancillary Agreement (other than the Ancillary Agreementsdelivered pursuant to Section 2.06(a)(ii)) to which the Purchaser is a party;

#####  

##### (iv)                              atrue and complete copy, certified by the Secretary or an Assistant Secretary ofthe Purchaser, of the resolutions duly and validly adopted by the Board ofDirectors of the Purchaser evidencing its authorization of the execution anddelivery of this Agreement and the Ancillary Agreements to which it is a partyand the consummation of the transactions contemplated hereby and thereby;

#####  

##### (v)                                 acertificate of the Secretary or an Assistant Secretary of the Purchasercertifying the names and signatures of the officers of the Purchaser authorizedto sign this Agreement and the Ancillary Agreements and the other documents tobe delivered hereunder and thereunder; and

 

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##### (vi)                              a certificate of a duly authorized officer of the Purchasercertifying as to the matters set forth in Section 7.01(a).

#####  

### (b)                                 Atthe Closing, the Purchaser shall deliver to the Escrow Agent, in accordancewith the Escrow Agreement, the Escrow Amount by wire transfer in immediatelyavailable funds to the accounts designated therefore in the Escrow Agreement.

###  

SECTION 2.07. Post-Closing Adjustment of Purchase Price.  The Purchase Price shall be subject toadjustment after the Closing as specified in this Section 2.07:

 

#### (a)                                  Preliminaryand Closing Statements of Net Assets. (i) On or before the date that is 25 calendar days following theClosing, the Seller shall deliver to the Purchaser the Preliminary Statement ofNet Assets.

####  

##### (ii)                                  Aspromptly as practicable, after the date that is 90 calendar days following theClosing, the Seller shall deliver to the Purchaser the Closing Statement of NetAssets, together with the report thereon of the Seller’s Accountants, statingthat the Closing Statement of Net Assets fairly presents Net Assets of theBusiness as of the close of business on the date of the Closing in accordancewith GAAP.

#####  

#### (b)                                 Disputes.  (i) Subject to clause (ii) of this Section 2.07(b), the ClosingStatement of Net Assets, the Closing Statement of Inventories and theReceivables Reserve set forth on the Closing Statement of Receivables deliveredby the Seller to the Purchaser shall be final, binding and conclusive on theparties hereto.

####  

(ii)                                  ThePurchaser may dispute any amounts reflected on (A) the Closing Statement of NetAssets, but only on the basis that the amounts reflected on the ClosingStatement of Net Assets were not arrived at in accordance with GAAP (it beingunderstood that any adjustments, estimates, accruals and calculations made onthe Closing Statement of Net Assets that are made on the same basis as similaritems on the Interim Statement of Net Assets shall be deemed to be made inaccordance with GAAP) or were arrived at based on mathematical or clericalerror, (B) the Closing Statement of Inventories but only on the basis that theamounts reflected on the Closing Statement of Inventories was not calculated inaccordance with the rules set forth on Exhibit A hereto or that they werearrived at based on mathematical or clerical error and (C) the ReceivablesReserve, but only on the basis that the Receivables Reserve was not arrived atin accordance with GAAP (it being understood that any adjustments, estimates,accruals and calculations made in respect of the Receivables Reserve that aremade on the same basis as similar items on the Interim Statement of Net Assetsshall be deemed to be made in accordance with GAAP) or were arrived at based onmathematical or clerical error; provided, however, that the Purchaser shallhave notified the Seller and the Seller’s Accountants in writing of eachdisputed item, specifying the estimated amount thereof in dispute and settingforth, in reasonable detail, the basis for such dispute, within 30 BusinessDays of the Seller’s delivery of the Closing Statement of Net Assets to thePurchaser.  In the event of such adispute, the Seller’s Accountants and the Purchaser’s Accountants shall attemptto reconcile their differences, and any resolution by them as to any disputedamounts shall be final, binding and conclusive on the parties hereto.  If any

 

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such resolution by theSeller’s Accountants and the Purchaser’s Accountants regarding the ClosingStatement of Net Assets or the Closing Statement of Inventories leaves indispute amounts the net effect of which in the aggregate would not affect theFinal Net Working Capital Balance, all such amounts remaining in dispute shallthen be deemed to have been resolved in favor of the Closing Statement of NetAssets or the Closing Statement of Inventories, as applicable, delivered by theSeller to the Purchaser.  If the Seller’sAccountants and the Purchaser’s Accountants are unable to reach a resolutionwith such effect within 20 Business Days after the receipt by the Seller andthe Seller’s Accountants of the Purchaser’s written notice of dispute, theSeller’s Accountants and the Purchaser’s Accountants shall submit the itemsremaining in dispute for resolution to Deloitte & Touche LLP (or, if suchfirm shall decline or is unable to act or is not, at the time of suchsubmission, independent of the Seller and the Purchaser, to another independentaccounting firm of international reputation mutually acceptable to the Sellerand the Purchaser) (either Deloitte & Touche LLP or such other accountingfirm being referred to herein as the “Independent Accounting Firm”),which shall, within 30 Business Days after such submission, determine andreport to the Seller and the Purchaser upon such remaining disputed items, andsuch report shall be final, binding and conclusive on the Seller and thePurchaser.  The fees and disbursements ofthe Independent Accounting Firm shall be allocated between the Seller and thePurchaser in the same proportion that the aggregate amount of such remainingdisputed items so submitted to the Independent Accounting Firm that isunsuccessfully disputed by each such party (as finally determined by theIndependent Accounting Firm) bears to the total amount of such remainingdisputed items so submitted.

 

(iii)                               Inacting under this Agreement, the Seller’s Accountants, the Purchaser’sAccountants and the Independent Accounting Firm shall be entitled to theprivileges and immunities of arbitrators.

 

#### (c)                                  PurchasePrice Adjustments.  (i) PreliminaryPurchase Price Adjustment.  (A)  In the event that the Preliminary Net WorkingCapital Balance set forth on the Preliminary Statement of Net Assets is lessthan $40,000,000 (the “Target NWCB”), then there shall be a preliminarydownward adjustment of the Purchase Price in an amount equal to suchdeficiency, the Purchaser shall deliver written notice to the Escrow Agentspecifying the amount of such preliminary downward adjustment of the PurchasePrice, and the Escrow Agent shall, within three Business Days of its receipt ofsuch notice and in accordance with the terms of the Escrow Agreement, pay anamount (the “Preliminary Purchase Price Reduction”) equal to seventy-fivepercent (75%) of such deficiency to the Purchaser out of the Escrow Fund bywire transfer in immediately available funds. In the event that the Escrow Fund is insufficient to cover the amount ofthe Preliminary Purchase Price Reduction, then the Escrow Agent shalldistribute the entire Escrow Fund to the Purchaser as provided above and theSeller or Audiovox, on behalf of the Seller, shall pay, on or prior to the samedate as the Escrow Agent distributes the Escrow Fund to the Purchaser, anamount to the Purchaser, by wire transfer in immediately available funds, equalto the amount of such deficiency.  Nofailure of the Purchaser to deliver a notice of the type specified in theimmediately preceding sentence shall relieve the Seller of the obligation topay the amount of such deficiency to the Purchaser.

 

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(B)                                Inthe event that the Preliminary Net Working Capital Balance exceeds the TargetNWCB, then there shall be a preliminary upward adjustment of the  Purchase Price in an amount equal tosuch excess and the Purchaser shall pay on or before the date that is 30 daysfollowing the date of the Closing an amount (the “Preliminary Purchase PriceIncrease”) equal to seventy-five percent (75%) of such excess to the Sellerby wire transfer in immediately available funds.  Following the preliminary purchase priceadjustments described in this Section 2.07(c)(i), theTarget NWCB shall be adjusted to (1) subtract any Preliminary Purchase PriceReduction previously paid to the Purchaser by the Escrow Agent or the Seller or(2) add any Preliminary Purchase Price Increase previously paid to the Sellerby the Purchaser (as so adjusted, the “Adjusted Target NWCB”)

 

###### (ii)                                  FinalPurchase Price Adjustment.  Each ofthe Closing Statement of Net Assets, the Closing Statement of Inventories andthe Receivables Reserve shall be deemed final for the purposes of thisSection 2.07 upon the earliest of (x) the failure of the Purchaser tonotify the Seller of a dispute within 30 Business Days of the Seller’s deliveryof the Closing Statement of Net Assets to the Purchaser, (y) theresolution of all disputes, pursuant to Section 2.07(b)(ii), by theSeller’s Accountants and the Purchaser’s Accountants and (z) the resolutionof all disputes, pursuant to Section 2.07(b)(ii), relating to the ClosingStatement of Net Assets the Closing Statement of Inventories or the ReceivablesReserve, as applicable, by the Independent Accounting Firm.  Within five Business Days of both the ClosingStatement of Net Assets and the Closing Statement of Inventories being deemedfinal, the Seller’s Accountants shall, with the agreement of the Purchaser’sAccountants, calculate the Final Net Working Capital Balance and the PurchasePrice shall be finally adjusted as follows:

######  

(A)                              Inthe event that the Final Net Working Capital Balance is less than the AdjustedTarget NWCB, then the Purchaser shall deliver written notice to the EscrowAgent and the Seller specifying the amount of such shortfall and the Escrow Agentshall, within three Business Days of its receipt of such notice and inaccordance with the terms of the Escrow Agreement, pay to the Purchaser theamount of such shortfall out of the Escrow Fund by wire transfer in immediatelyavailable funds.  In the event that theEscrow Fund is insufficient to cover the amount of such shortfall, then theEscrow Agent shall distribute the entire Escrow Fund to the Purchaser asprovided above and the Seller or Audiovox, on behalf of the Seller, shall pay,on or prior to the same date as the Escrow Agent distributes the Escrow Fund tothe Purchaser, an amount to the Purchaser, by wire transfer in immediatelyavailable funds, equal to the amount of such deficiency.  No failure of the Purchaser to deliver anotice of the type specified in the immediately preceding sentence shallrelieve the Seller of the obligation to pay the amount of such deficiency tothe Purchaser.

 

(B)                                Inthe event that the Final Net Working Capital Balance exceeds the AdjustedTarget NWCB, then the Purchaser shall pay within three Business Days of theFinal Net Working Capital Balance being calculated by the Seller’s

 

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Accountants, with the agreement of the Purchaser’s Accountants, theamount of such excess to the Seller by wire transfer in immediately availablefunds.

 

#### (d)                                 Untilthe Closing Statement of Net Assets is deemed final pursuant to Section2.07(c), the Purchaser shall respond to and process warranty claims insubstantially the same manner in which the Seller responded to and processedwarranty claims prior to the Closing, including using the same third partyservice providers used by the Seller and charging actual costs for in-houserepairs (which costs shall be calculated consistently with how they werecalculated by the Seller).

####  

SECTION 2.08. Escrow. Prior to the Closing, the Seller and the Purchaser shall enter into anEscrow Agreement with the Escrow Agent substantially in the form ofExhibit 2.08 (the “Escrow Agreement”).  In accordance with the terms of the EscrowAgreement, the Purchaser shall deposit the Escrow Amount at the Closing, in anaccount to be managed and paid out by the Escrow Agent in accordance with theterms of the Escrow Agreement.

 

SECTION 2.09. Receivables.

 

### (a)                                  Onor prior to 5:30 p.m. EST on the Business Day immediately following the date onwhich the Closing occurs, the Seller shall deliver to the Purchaser the ClosingStatement of Receivables.  Any amountspaid by any Customer (or any of its wholly owned Subsidiaries) to the Purchaser(or any of its wholly-owned Subsidiaries), whether in respect of a Receivablelisted on the Receivables Listing or otherwise, shall, no later than (i) in thecase of a Receivable paid by wire transfer, the Business Day following the dayon which payment was received and (ii) in the case of a Receivable paid otherthan by wire transfer, the third Business Day following the day on whichpayment was received, be paid by wire transfer of immediately available fundsto the Seller; provided, however that (i) Purchaser shall have no obligation topay over amounts received by a particular Customer once the aggregate amountpaid to the Seller and the Purchaser by such Customer beginning on the BusinessDay following the Closing equals the Per Customer Amount and (ii) if a Customerhas given notice to the Seller or the Purchaser that such Customer is disputingits obligation to pay any amount of the Receivable listed on the ReceivablesListing as being owed by the Customer (to the extent such Receivable isdisputed, a “Disputed Receivable”) or if a Receivable is deemed to be aDisputed Receivable (as described below), the Purchaser shall not be obligatedto pay over amounts received from such Customer in excess of such Customer’sPer Customer Amount less the amount any Disputed Receivable.  Any Receivable not fully paid by a Customerby the date that is 25 days after the date that such Receivable is due may bedeemed by the Seller or the Purchaser, upon written notice thereof, to theother party to be a Disputed Receivable.

###  

### (b)                                 Eachof the Purchaser and the Seller shall give prompt written notice to the otherthat it has received notice of a Disputed Receivable.  The Seller shall not initiate, or threaten toinitiate, any legal proceedings against a Customer who is the obligor of aDisputed Receivable to collect such Disputed Receivable until at least 15Business Days following the date of the notice of the Disputed Receivable.  If, at the end of such 15 Business Dayperiod, such Disputed Receivable has not been paid to the Seller (either by theCustomer or by the Purchaser on behalf of such Customer), the Seller may takeany and all legal actions it believes are desirable to cause such DisputedReceivable to be paid to it.

 

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### (c)                                  Priorto 6 p.m. EST on each Business Day during the Collection Period (as hereinafterdefined), the Purchaser and the Seller shall inform each other by email of theamount of payments that it has received from each Customer on such BusinessDay; provided, however that no information need be given with respect to anyCustomer once the Seller has received from such Customer the full amount ofsuch Customer’s Per Customer Amount.  Allamounts paid by a Customer, whether paid to the Seller directly or remitted tothe Purchaser and then paid to the Seller shall be credited against suchCustomer’s Per Customer Amount.  In the event that, during the120 day period following the Closing, a Customer gives notice that a Receivableset forth on the Receivables Listing is a Disputed Receivable and, had suchnotice been given at an earlier date, the Purchaser would not have beenobligated to pay to the Seller an amount pursuant to this Section 2.09 that thePurchaser has paid over to the Seller, then the Seller shall pay back tothe Purchaser the full amount disputed by such Customer within three BusinessDays by wire transfer of immediately available funds.  For 120 days after the Closing, the Purchasershall direct and instruct its relevant employees to reasonably cooperate withthe Seller in promptly collecting all Receivables and in resolving DisputedReceivables, in each case, in a manner consistent with the past practices ofthe Business.

###  

### (d)                                 Fromand after the Closing until the earlier of (x) the 90th Business Day followingthe Closing and (y) the date on which the Seller has received full payment ofall Receivables reflected on the Receivables Listing, net of the aggregateReceivables Reserve and any Disputed Receivables (such period, the “CollectionPeriod”), the Purchaser shall not, and it shall cause its Affiliates andrepresentatives not to, take any action that would reasonably be expected tointerfere with the Seller’s ability to promptly collect any Receivablereflected on the Receivables Listing, including, without limitation, bysuggesting or telling any Customer that for any reason it should not pay, orthat it should delay paying, the full amount of its Receivable reflected on theReceivables Listing.

###  

### (e)                                  Inthe event that the Receivables Reserve is adjusted upward pursuant to Section2.07(c), the Purchaser shall give written notice to the Seller of any PerCustomer Amounts paid over to the Seller by the Purchaser in accordance withthis Section 2.09 prior to the Receivables Reserve having been finallydetermined that would be reduced by virtue of such adjustment and the Sellershall pay back to the Purchaser such excess Per Customer Amounts (net of anyamounts that the Purchaser would be required to pay to the Seller pursuant tothis Section 2.09(e)) within two Business Days following such adjustment bywire transfer of immediately available funds. In the event that the Receivables Reserve is adjusted downward pursuantto Section 2.07(c), the Purchaser shall pay over to the Seller within twoBusiness Days following such adjustment any amounts that the Purchaser wouldhave been required to pay to the Seller had the Receivables Reserve been soadjusted immediately following the Closing (net of any amounts that the Seller  would berequired to pay back to the Purchaser pursuant to this Section 2.09(e)).

###  

SECTION 2.10. Inventories.  On the day immediately following the date ofthe Closing, the Seller shall deliver to the Purchaser the Closing Statement ofInventories.

 

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# ARTICLE IIIREPRESENTATIONS AND WARRANTIESOF THE SELLER

 

As an inducement to the Purchaser to enter into thisAgreement, the Seller and Audiovox (only as to itself with respect to thematters set forth in Sections 3.01, 3.02, 3.11(b) and 3.30) hereby representand warrant to the Purchaser as follows:

 

SECTION 3.01. Organization, Authority and Qualification and Corporate Power of theSeller and Audiovox . (a)  Each of the Seller andAudiovox is a corporation duly organized, validly existing, and in goodstanding under the Laws of its jurisdiction of incorporation, has the requisitecorporate power and authority to carry on its business as it is now beingconducted and to own and operate the properties and assets now owned andoperated by it.  The Seller is dulylicensed or qualified to do business and is in good standing in eachjurisdiction which the properties leased by it or the operation of its businessmakes such licensing or qualification necessary except where the failure to beso qualified or in good standing will not result in a Material Adverse Effect.

 

(b)                                 Eachof the Seller and Audiovox has the requisite corporate power and authority toexecute, deliver and, subject to receipt of the vote of the Audiovoxstockholders contemplated in Section 3.30(b) and the approval of the Seller’sstockholders, which has been obtained, perform this Agreement and each of theAncillary Agreements to be executed, delivered and performed in connection withthis Agreement, and except as set forth in Sections 3.02 and 3.03, each of theSeller and Audiovox has all requisite power and authority to transfer thePurchased Assets to the Purchaser.  Theexecution, delivery and performance of this Agreement and each of the AncillaryAgreements to which the Seller and Audiovox is a party, and the consummation ofthe transactions contemplated hereby and thereby, have been duly authorized byall necessary action (corporate or otherwise) on the part of the Seller andAudiovox (other than the vote of the Audiovox stockholders contemplated inSection 3.30(b) and the approval of the Seller’s stockholders, which has beenobtained).  This Agreement has been, andupon their execution and delivery the Ancillary Agreements shall have been,duly and validly executed and delivered by the Seller and Audiovox, and(assuming due authorization, execution and delivery by the Purchaser) thisAgreement constitutes, and upon their execution and delivery the AncillaryAgreements shall constitute, the legal, valid and binding obligation of theSeller and Audiovox, enforceable against the Seller and Audiovox in accordancewith their respective terms, except as such enforcement may be limited byapplicable bankruptcy, insolvency, moratorium or similar laws affecting theenforcement of creditors’ rights generally. No other corporate proceedings on the part of the Seller or Audiovox arenecessary to authorize this Agreement and the Ancillary Agreements (other thanthe vote of the Audiovox stockholders contemplated in Section 3.30(b) and theapproval of the Seller’s stockholders, which has been obtained).

 

(c)                                  Thereare no subsidiaries or Affiliates of Audiovox, other than ACC, Quintex andACCC, which own, lease or have the legal right to use, or which are a party to andenjoy the right to the benefits of the Assumed Contracts and other arrangementswhich constitute, the Purchased Assets. Section 3.01(c) of the Disclosure Schedule sets forth the

 

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subsidiariesof ACC other than Quintex and ACCC.  Noneof the entities set forth in Section 3.01(c) of the Disclosure Schedule haveany assets.  The liabilities of GLMWireless Communications, Inc. exceed its assets.

 

SECTION 3.02. No Conflict.  Theexecution, delivery and performance of this Agreement and the AncillaryAgreements by each of the Seller and Audiovox do not and will not (a) violate,conflict with or result in the breach of any provision of the certificate ofincorporation or by-laws (or similar organizational documents) of the Seller orAudiovox, as the case may be, (b) conflict with or violate any material Law orGovernmental Order applicable to the Seller or Audiovox, as the case may be, orany of its assets, properties or businesses, including the Business (except asmay result from any facts or circumstances relating solely to the Purchaser),or (c) except as set forth in Section 3.02(c) of the Disclosure Schedule,conflict with, result in any breach of, constitute a default (or event whichwith the giving of notice or lapse of time, or both, would become a default)under, require any consent under, or give to others any rights of termination,amendment, acceleration, suspension, revocation or cancellation of, or resultin the creation of any Encumbrance on any of the Purchased Assets pursuant to,any material note, bond, mortgage or indenture, contract, agreement, lease,sublease, license, permit, franchise or other instrument or arrangement towhich the Seller or Audiovox is a party or by which any of the Purchased Assetsis bound or affected.  The Seller knowsof no reason (except as may result from any facts or circumstances relatingsolely to the Purchaser) why all consents set forth in Section 3.02(c) of theDisclosure Schedule will not be received.

 

SECTION 3.03. Governmental Consents and Approvals.  The execution, delivery and performance ofthis Agreement and each Ancillary Agreement by the Seller do not and will notrequire any material consent, approval, authorization or other order of, actionby, filing with or notification to, any Governmental Authority applicable tothe Seller or Audiovox, except (a) as described in Section 3.03 of theDisclosure Schedule and (b) the pre-merger notification and waiting periodrequirements of the HSR Act.  The Sellerknows of no reason why all the consents, approvals and authorizations necessaryfor the consummation of the transactions contemplated by this Agreement willnot be received.

 

SECTION 3.04. Financial Information; Books and Records.  (a) True and complete copies of (i) the Interim Statement of Net Assetsas set forth in Section 3.04 of the Disclosure Schedule, (ii) the auditedbalance sheet of the Seller for each of the two fiscal years ended as ofNovember 30, 2003 and 2002 respectively, and the related audited statements ofincome, stockholders’ equity and cashflows of the Seller, together with allrelated notes and schedules thereto, accompanied by the reports thereon of theSeller’s Accountants and Seller’s Prior Accountants (collectively referred to hereinas the “Financial Statements”) and (iii) the unaudited balancesheet of the Seller as of February 29, 2004, and the related statements ofincome, stockholders’ equity and cashflows of the Seller (collectively referredto herein as the “Interim Financial Statements”) have been delivered bythe Seller to the Purchaser.  The InterimStatement of Net Assets (i) was prepared in accordance with the books ofaccount and other financial records of the Seller, (ii) presents fairly,in all material respects, the Net Assets of the Business as of the date thereof(except that it excludes the Excluded Assets and Excluded Liabilities),(iii) has been prepared in accordance with GAAP, and (iv) includesall adjustments that are necessary for a fair presentation of the financialcondition of the Business as of the date thereof.  The Financial Statements and the InterimFinancial Statement (i) were prepared in

 

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accordance with the booksof account and other financial records of the Seller, (ii) present fairly,in all material respects, the financial condition and results of operations ofthe Business as of the dates thereof or for the periods covered thereby,(iii) have been prepared in accordance with GAAP and (iv) in the caseof the Interim Statement of Net Assets, include all adjustments (consistingonly of normal recurring accruals) that are necessary for a fair presentationof the financial condition of the Business and the results of the operations ofthe Business as of the dates thereof or for the periods covered thereby.

 

### (b)                                 Thebooks of account and other financial records of the Seller in all materialrespects:  (i) reflect all items ofincome and expense and all assets and Liabilities required to be reflected thereinin accordance with GAAP, (ii) are complete and correct, and do not containor reflect any material inaccuracies or discrepancies and (iii) have beenmaintained in accordance with good business and accounting practices.

###  

### (c)                                  TheSellers have the parts that it believes are reasonably necessary to fulfill itscontractual obligations to repair products sold by the Business prior to theClosing.  There are no materialliabilities relating to obligations under the Assumed Contracts for theprovision of training or technical support, other than liabilities that arereflected on the Interim Statement of Net Assets and will be reflected on theClosing Statement of Net Assets.

###  

SECTION 3.05. Absence of Undisclosed Liabilities.  There are no material Liabilities of theBusiness, other than Liabilities (i) reflected or reserved against on theInterim Statement of Net Assets, (ii) set forth in Section 3.05 of theDisclosure Schedule, (iii) incurred since the date of the Interim Statement ofNet Assets in the ordinary course of business, consistent with past practice,of the Seller and which do not and could not have a Material Adverse Effect or(iv) arising out of the Assumed Contracts.

 

SECTION 3.06. Receivables.  Section 3.06 of the Disclosure Scheduleis an aged list of the Receivables as of the Interim Statement Date showingseparately those Receivables that as of such date had been outstanding for(a) 30 days or less, (b) 31 to 60 days, (c) 61 to 90 days, and(d) more than 90 days.  Except tothe extent, if any, reserved for on the Interim Statement of Net Assets, allReceivables reflected on the Interim Statement of Net Assets arose from, andthe Receivables existing as of the Closing will have arisen from, the sale ofInventory or services to Persons not affiliated with the Seller and in theordinary course of business consistent with past practice and, except asreserved against on the Interim Statement of Net Assets, constitute or willconstitute, as the case may be, only valid, undisputed claims of the Seller notsubject to valid claims of setoff or other defenses or counterclaims other thannormal cash discounts and warranty claims and customary reserves required byGAAP accrued in the ordinary course of business consistent with past practice.

 

SECTION 3.07. Inventories.  (a) Subject to amounts reserved therefor on the Interim Statement of NetAssets, the values at which all Inventories are carried on the InterimStatement of Net Assets is consistent with the last sentence of the definitionof “Inventories” herein.  Except as setforth in Section 3.07(a)(i) of the DisclosureSchedule, the Seller has good and marketable title to the Inventories free andclear of all Encumbrances.  Except as setforth in Section 3.07(ii) of the Disclosure Schedule, the Inventories do notconsist of, in any material amount, items that are obsolete, defective orslow-moving.  The Inventories do notconsist of any

 

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itemsheld on consignment.  The Seller is notunder any obligation or liability with respect to accepting returns of items ofInventory or merchandise in the possession of their customers other than in theordinary course of business consistent with past practice or except as setforth in Section 3.07(a)(iii) of the DisclosureSchedule.  No clearance or extraordinarysale of the Inventories has been conducted since the Interim StatementDate.  The Seller has not acquired orcommitted to acquire Inventory for sale which is not of a quality and quantityusable in the ordinary course of business within a reasonable period of timeand consistent with past practice, nor has the Seller changed the price of anyInventory except for (i) price reductions to reflect any reduction in thecost thereof to the Seller, (ii) reductions and increases responsive tonormal competitive conditions and consistent with the Seller’s past salespractices, (iii) increases to reflect any increase in the cost thereof tothe Seller and (iv) increases and reductions made with the written consentof the Purchaser.

 

(b)                                 Section 3.07(b)of the Disclosure Schedule includes a complete list of the addresses of allwarehouses and other facilities in which the Inventories are located.

 

SECTION 3.08. Assumed Contracts.  Each description of an Assumed Contract orcategory of Assumed Contracts described in Part II of Section 2.01(a)(x) of the Disclosure Schedule is accurate in all materialrespects.

 

SECTION 3.09. Sales and Purchase Order Backlog.  (a)  Asof the Business Day immediately preceding the date hereof, open sales ordersaccepted by the Seller and relating to the Business totaled $244,768,080.  Section 3.09(a) of the Disclosure Schedulelists all sales orders exceeding $100,000 per order which have been accepted bythe Seller (related to the Business), and which were open as of the datehereof.

 

### (b)                                 Asof the Business Day immediately preceding the date hereof, open purchase ordersissued by the Seller and relating to the Business, totaled $737,911,285.  Section 3.09(b) of the Disclosure Schedulelists all purchase orders exceeding $100,000 per order which have been issuedby the Seller (related to the Business) and which were open as of the datehereof.

###  

SECTION 3.10. Conduct in the Ordinary Course; Absence of Certain Changes, Eventsand Conditions.  Except as set forthin Section 3.10 of the Disclosure Schedule, since the Interim Statement Date,and, except with respect to clause (x) below (which speaks as of the datehereof and, pursuant to Section 7.02(a), as of the date of the Closing), priorto the date hereof, the Business has been conducted in the ordinary course andconsistent with past practice.  Asamplification and not limitation of the foregoing, since the Interim StatementDate, the Seller has not:

 

#### (a)                                  permitted or allowed any of the Purchased Assets to besubjected to any Encumbrance, other than Permitted Encumbrances andEncumbrances that will be released at or prior to the Closing;

####  

#### (b)                                 except in the ordinary course of business consistent withpast practice and payments under contracts entered into prior to the datehereof as disclosed in Section 3.14 of the Disclosure Schedule, discharged orotherwise obtained the release of any

 

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#### Encumbrancerelated to the Business, or paid or otherwise discharged any Liability relatedto the Business, other than current liabilities reflected on the Interim  Statement ofNet Assets and current liabilities incurred in the ordinary course of businessconsistent with past practice since the Interim Statement Date;

####  

#### (c)                                  writtendown or written up (or failed to write down or write up in accordance with GAAPconsistent with past practice) the value of any Inventories or Receivables orrevalued any of the Purchased Assets other than in the ordinary course of businessconsistent with past practice and in accordance with GAAP;

####  

#### (d)                                 madeany change in any method of accounting or accounting practice or policy used bythe Seller and relating to the Business, other than such changes required byGAAP;

####  

#### (e)                                  amended, terminated,cancelled or compromised any material claims of the Seller (related to theBusiness) or waived any other rights of substantial value to the Seller(related to the Business), other than with respect to the Excluded Assets;

####  

#### (f)                                    sold,transferred, leased, subleased, licensed or otherwise disposed of anyproperties or assets, real, personal or mixed (including leasehold interestsand intangible property) of the Seller (related to the Business), other thanthe sale of Inventories in the ordinary course of business consistent with pastpractice, other than with respect to the Excluded Assets;

####  

#### (g)                                 mergedwith, entered into a consolidation with or acquired an interest of 5% or morein any Person engaged in a business relating to the Business or acquired a substantialportion of the assets or business of any Person engaged in a business relatingto the Business or any division or line of business thereof, or otherwiseacquired any material assets relating to the Business other than in theordinary course of business consistent with past practice;

####  

#### (h)                                 made any capital expenditure or commitment for any capitalexpenditure , in each case relating to the Business, in excess of $500,000individually or $2,000,000 in the aggregate;

####  

#### (i)                                     exceptin the ordinary course of business consistent with past practice, issued anysales orders or otherwise agreed to make any purchases, in each case relatingto the Business, involving exchanges in value in excess of $5,000,000individually or $10,000,000 in the aggregate;

####  

#### (j)                                     made any material changes in the customary methods ofoperations of the Business, including those relating to purchasing,Inventories, marketing, booking sales or Receivables, selling and pricing;

####  

#### (k)                                  made, revoked or changed any Tax election or method of Taxaccounting, or settled or compromised any liability with respect to Taxes, ineach case relating to the Business or the Purchased Assets;

 

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#### (l)                                     incurred any material Indebtedness relating to the Business,other than Inter-company Payables incurred in the ordinary course of businessconsistent with past practice;

####  

#### (m)                               made any loan to, guaranteed any Indebtedness of orotherwise incurred any Indebtedness on behalf of any Person in connection withthe Business, except for any amount that will be discharged prior to theClosing;

####  

#### (n)                                 failed to pay anycreditor of the Business any material amount owed to such creditor when dueunless such amount was disputed in good faith and subject to customaryadjustments;

####  

#### (o)                                 exceptin the ordinary course of business consistent with past practice or as requiredby Law (i) granted any increase, or announced any increase, in the wages,salaries, compensation, bonuses, incentives, pension or other benefits payableby the Seller to any of its employees to whom offers of employment will be madepursuant to Section 6.01, including any increase or change pursuant to anyPlan, or (ii) established or increased or promised to increase anybenefits under any Plan;

####  

#### (p)                                 entered into anyagreement, arrangement or transaction relating to the Business with any of itsdirectors, officers, employees or stockholders (or with any relative,beneficiary, spouse or Affiliate of such Persons);

####  

#### (q)                                 terminated,discontinued, closed or disposed of any plant, facility or other businessoperation used in the Business, or laid off any employees employed inconnection with the Business (other than layoffs in the ordinary course ofbusiness consistent with past practice) or implemented any early retirement,separation or program providing early retirement window benefits within themeaning of Section 1.401(a)-4 of the Regulations or announced or planned anysuch action or program for the future;

####  

#### (r)                                    disclosedany secret or confidential Intellectual Property relating to the Business(except by way of issuance of a patent) or permitted to lapse or becomeabandoned any Intellectual Property relating to the Business (or anyregistration or grant thereof or any application relating thereto) to which, orunder which, the Seller has any right, title, interest or license;

####  

#### (s)                                  allowed any Permit or Environmental Permit relating to theBusiness to lapse or terminate or failed to renew any insurance policy, Permitor Environmental Permit relating to the Business that is scheduled to terminateor expire within 45 calendar days of the Closing;

####  

#### (t)                                    failed to maintain the plant, property and equipmentincluded in the Purchased Assets in good repair and operating condition,ordinary wear and tear excepted;

####  

#### (u)                                 suffered any casualty loss or damage with respect to any ofthe Purchased Assets which in the aggregate have a replacement cost of morethan $100,000, whether or not such loss or damage shall have been covered byinsurance;

 

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#### (v)                                 amended, modified orconsented to the termination of any Material Contract or the Seller’s rightsthereunder;

####  

#### (w)                               (i)abandoned, sold, assigned, or granted any security interest in or to any itemof the Owned Intellectual Property, Licensed Intellectual Property orTransferred IP Agreements, including failing to perform or cause to beperformed all applicable filings, recordings and other acts, and pay or causedto be paid all required fees and taxes, to maintain and protect its interest insuch Intellectual Property, (ii) granted to any third party any licensewith respect to any Owned Intellectual Property or Licensed IntellectualProperty, other than licenses of Transferred Software to the customers of theBusiness in the ordinary course of its business, (iii) developed, createdor invented any Intellectual Property jointly with any third party (other thansuch joint development, creation or invention with a third party that is inprogress prior to Interim Statement Date) or (iv) disclosed, or allow to bedisclosed, any confidential Intellectual Property, unless such IntellectualProperty is subject to a confidentiality or non-disclosure covenant protectingagainst disclosure thereof;

####  

#### (x)                                   suffered any Material Adverse Effect;

####  

#### (y)                                 agreed,whether in writing or otherwise, to take in a legally enforceable manner any ofthe actions specified in this Section 3.10 or granted any options to purchase,rights of first refusal, rights of first offer or any other similar rights orcommitments with respect to any of the actions specified in this Section 3.10,except as expressly contemplated by this Agreement and the AncillaryAgreements;

####  

#### (z)                                   terminated the employment nor received the resignation ofany Key Employees;

####  

#### (aa)                            issueda notice of intention to terminate the employment of any Key Employees nor received a noticeof intention to resign by any KeyEmployees; or

####  

#### (bb)                          settled, or agreed to settle,any action, suit or proceeding relating to the Business or the Purchased Assetsother than in the ordinary course of business consistent with past practice.

####  

SECTION 3.11. Litigation.  (a) Except as set forth in Section 3.11 ofthe Disclosure Schedule (which, with respect to each Action set forth therein,sets forth the parties and the date and method commenced), there are nomaterial Actions by or against the Seller or any Affiliate thereof and relatingto the Business or affecting any of the Purchased Assets or the Businesspending before any Governmental Authority (or, to the best knowledge of theSeller, threatened to be brought by or before any Governmental Authority).  The Seller is not subject to any Actionrelating to the Business that has a Material Adverse Effect or is reasonablylikely to affect the legality, validity or enforceability of this Agreement,any Ancillary Agreement or the consummation of the transactions contemplatedhereby or thereby.  Neither the Sellernor any of the Seller’s assets or properties, including the Purchased Assets,is subject to any Governmental Order (nor, to the best knowledge of the Seller,are there any such Governmental Orders threatened to be imposed by anyGovernmental Authority) which has a Material Adverse Effect

 

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or could affectthe legality, validity or enforceability of this Agreement, any AncillaryAgreement or the consummation of the transactions contemplated hereby orthereby.

 

(b) Audiovox is not subject to any Action relating tothe Business that has a Material Adverse Effect or is reasonably likely toaffect the legality, validity or enforceability of this Agreement, anyAncillary Agreement or the consummation of the transactions contemplated herebyor thereby.  Audiovox is not subject toany Governmental Order (nor, to the best knowledge of Audiovox, are there anysuch Governmental Orders threatened to be imposed by any GovernmentalAuthority) which has a Material Adverse Effect or could affect the legality,validity or enforceability of this Agreement, any Ancillary Agreement or theconsummation of the transactions contemplated hereby or thereby.

 

SECTION 3.12. Compliance with Laws. (a)  The Seller has conducted andcontinues to conduct the Business in accordance with all material Laws andGovernmental Orders applicable to the Seller or any of its properties orassets, including the Purchased Assets, and the Seller is not in materialviolation, or the Seller has not been in material violation during the lastthree years, of any such Law or Governmental Order, except as set forth inSection 3.12 (a) of the Disclosure Schedule.

 

### (b)                                 Section3.12(b) of the Disclosure Schedule sets forth a brief description of eachGovernmental Order applicable to the Seller (related to the Business) or any ofits properties or assets, including the Purchased Assets, or the Business andno such Governmental Order has or has had a Material Adverse Effect or isreasonably likely to affect the legality, validity or enforceability of thisAgreement, any Ancillary Agreement or the consummation of the transactionscontemplated hereby or thereby.

###  

SECTION 3.13. Environmental and Other Permits and Licenses; Related Matters.  (a)  Except as set forth in Section 3.13(a) ofthe Disclosure Schedule:

 

##### (i)                                     TheSeller (as it relates to the Business) is in material compliance with allapplicable Environmental Laws and all Environmental Permits.

#####  

##### (ii)                                  Therehas been no material Release of any Hazardous Material on any of the LeasedReal Property or, during the period of the Seller’s ownership, lease, use oroccupancy thereof, on any property formerly owned, leased, used or occupied bythe Seller.

#####  

##### (iii)                               Thereare no Environmental Claims pending or, to the best knowledge of the Seller,threatened against the Seller (relating to the Business) or the Leased RealProperty, and to the Seller’s best knowledge there are no circumstances thatcan reasonably be expected to form the basis of any such Environmental Claim.

#####  

##### (iv)                              TheSeller has no actual or alleged material liability, whether fixed or contingent,relating to the Business under any Environmental Law.

#####  

(b)                                 Neitherthe execution of this Agreement or the Ancillary Agreements nor theconsummation of the transactions contemplated hereby or thereby will requireany Remedial

 

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Action or noticeto or consent of Governmental Authorities or third parties pursuant to anyapplicable Environmental Law or Environmental Permit.

 

SECTION 3.14. Material Contracts. (a)  Section 3.14(a) of theDisclosure Schedule lists each of the following contracts and agreements(including, without limitation, oral agreements and informal arrangements) ofthe Seller relating to the Business (collectively, the “Material Contracts”):

 

##### (i)                                     eachcontract, agreement, invoice, purchase order and other arrangement, for thepurchase of Inventory, spare parts, other materials or personal property, withany supplier or for the furnishing of services to the Seller or otherwiserelated to the Business under the terms of which the Seller:  (A) is reasonably likely to pay orotherwise give consideration of more than $500,000 in the aggregate during thefiscal year ending November 30, 2004, (B) is reasonably likely to pay orotherwise give consideration of more than $120,000 in the aggregate over theremaining term of the contract, or (C) cannot be cancelled by the Sellerwithout penalty or further payment and without more than 30 days’ notice and isreasonably likely to pay or otherwise give consideration of more than $120,000in the aggregate over the remaining term of the contract;

#####  

##### (ii)                                  eachcontract, agreement, invoice, sales order and other arrangement, for the saleof Inventory or other personal property, or for the furnishing of services bythe Seller which:  (A) is likely toinvolve consideration of more than $100,000 in the aggregate during the fiscalyear ending November 30, 2004, (B) is likely to involve consideration ofmore than $500,000 in the aggregate over the remaining term of the contract or(C) cannot be cancelled by the Seller without penalty or further paymentand without more than 30 days’ notice and is likely to involve consideration ofmore than $500,000 in the aggregate during the remaining term of the contract;

#####  

##### (iii)                               allbroker, distributor, dealer, manufacturer’s representative, franchise, agency,sales promotion, market research, marketing, consulting and advertisingcontracts and agreements to which the Seller is a party and which would requirea payment in 2004 in excess of $120,000;

#####  

##### (iv)                              allmanagement contracts and contracts with independent contractors or consultants(or similar arrangements) to which the Seller is a party and which are notcancelable without penalty or further payment and without more than 30 days’notice and which would require a payment in 2004 in excess of $120,000;

#####  

##### (v)                                 allcontracts and agreements relating to Indebtedness of the Seller;

#####  

##### (vi)                              allcontracts and agreements with any Governmental Authority to which the Seller isa party;

#####  

##### (vii)                           allcontracts and agreements that limit or purport to limit the ability of theSeller to compete in any line of business or with any Person or in anygeographic area or during any period of time;

 

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##### (viii)                        allcontracts and agreements between or among the Seller and any Affiliate of theSeller;

#####  

##### (ix)                                allcontracts and agreements providing for employee benefits under any Plan listedin Section 3.21 of the Disclosure Schedule;

#####  

##### (x)                                   allemployment contracts, written or oral, with any officer, consultant, directoror employee of the Business;

#####  

##### (xi)                                allcontracts and agreements relating to restrictions on competition of theemployees of the Seller;

#####  

##### (xii)                             all joint venture contracts or arrangementsor other arrangements involving sharing of profits;

#####  

##### (xiii)                          all agreements relating to the dispositionor acquisition of assets or any interest in any business enterprise other thanthose entered into in the ordinary course and consistent with past practice;

#####  

##### (xiv)                         all settlements of administrative, judicial,mediation or arbitration proceedings;

#####  

##### (xv)                            allleases or subleases of Leased Real Property;

#####  

##### (xvi)                         allleases or subleases of Tangible Personal Property which require a payment in2004 in excess of $100,000;

#####  

##### (xvii)                      allTransferred IP Agreements; and

#####  

##### (xviii)                   allother contracts and agreements, whether or not made in the ordinary course ofbusiness, which are material to the Seller or the conduct of the Business, orthe absence of which would have a Material Adverse Effect.

#####  

### (b)                                 Exceptas set forth in Section 3.14(b) of the Disclosure Schedule, each MaterialContract is valid and binding on the Seller thereto and is in full force andeffect.  The Seller is not in materialbreach of, or default under, any Material Contract.

###  

### (c)                                  Tothe best knowledge of the Seller, no other party to any Material Contract is inmaterial breach thereof or default thereunder and the Seller has not receivedany notice of termination, cancellation, breach or default under any MaterialContract.

###  

### (d)                                 TheSeller has made available to the Purchaser true and complete copies of allMaterial Contracts, including all amendments, supplements and modificationsthereto or waivers currently in effect thereunder.

###  

### (e)                                  Exceptas set forth in Section 3.14(e) of the Disclosure Schedule, there is no contract,agreement or other arrangement granting any Person any preferential right to

 

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### purchase,other than in the ordinary course of business consistent with past practice,any of the Purchased Assets.

###  

SECTION 3.15. Intellectual Property. (a)  Section 3.15(a) of theDisclosure Schedule sets forth a true and complete list of (i) all patents andpatent applications, registered trademarks and trademark applications, andregistered copyrights and copyright applications, and domain names included inthe Owned Intellectual Property, (ii) all Transferred IP Agreements and (iii)all other Owned Intellectual Property (other than trade secrets) material tothe Business.

 

### (b)                                 Exceptas set forth in Section 3.15(b) of the Disclosure Schedule to the bestknowledge of the Seller, the operation of the Business as currently conductedor as contemplated to be conducted, the use of the Owned Intellectual Property,the Licensed Intellectual Property, the Shared MIS Systems and the DevelopedSoftware in connection therewith and the Seller’s transmission, use, linkingand other practices related to the operation of their web sites in connectionwith the Business, the content thereof and the advertisements containedtherein, do not, in any material respects, conflict with, infringe,misappropriate or otherwise violate the Intellectual Property or otherproprietary rights, including rights of privacy, publicity and endorsement, ofany third party, and no Actions or Claims are pending or, to the best knowledgeof the Seller, threatened against the Seller alleging any of the foregoing.

###  

### (c)                                  TheSeller is the exclusive owner of the entire and unencumbered right, title andinterest in and to the Owned Intellectual Property and the Transferred IPAgreements, and the Seller has a valid right to use the Owned IntellectualProperty and Licensed Intellectual Property in the ordinary course of theBusiness as currently conducted or as contemplated to be conducted subject onlyto the terms of the Transferred IP Agreements in the case of LicensedIntellectual Property.

###  

### (d)                                 NoOwned Intellectual Property or Developed Software, or to the best knowledge ofSeller, any Licensed Intellectual Property, is subject to any outstandingdecree, order, injunction, judgment or ruling restricting the use of suchIntellectual Property or that would impair the validity or enforceability ofsuch Intellectual Property.

###  

### (e)                                  Exceptfor the Excluded Intellectual Property, the Owned Intellectual Property and theLicensed Intellectual Property include all of the Intellectual Property used inthe ordinary day-to-day conduct of the Business, and there are no other itemsof Intellectual Property that are material to the ordinary day-to-day conductof the Business.  The Owned IntellectualProperty and the Developed Software and, to the best knowledge of the Seller,the Licensed Intellectual Property, are subsisting, valid and enforceable, andhave not been adjudged invalid or unenforceable in whole or part.

###  

### (f)                                    Exceptas set forth in Section 3.15(f) of the Disclosure Schedule, no material Actionsor Claims have been asserted or are pending or, to the best knowledge of theSeller, are threatened against the Seller (i) based upon or challenging orseeking to deny or restrict the use by the Seller of any of the OwnedIntellectual Property, the Licensed Intellectual Property, the Shared MISSystems and the Developed Software, (ii) alleging that any services providedby, processes used by, or products manufactured or sold by the Seller (inconnection with the Business) infringe or misappropriate any IntellectualProperty right of any third party or

 

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### (iii) alleging that the Licensed IntellectualProperty is being licensed or sublicensed in conflict with the terms of anylicense or other agreement.

###  

### (g)                                 Tothe best knowledge of the Seller, no Person is engaging in any activity thatinfringes the Owned Intellectual Property or Licensed IntellectualProperty.  Except as set forth in Section3.15(g) of the Disclosure Schedule, the Seller has not granted any license orother right to any third party with respect to the Owned Intellectual Propertyor Licensed Intellectual Property.

###  

### (h)                                 Thereis no Software (i) material to the operation of the Business or(ii) manufactured, distributed, sold, licensed to a third party ormarketed by the Seller in connection with the Business, other than, in eachcase, the Excluded Intellectual Property.

###  

### (i)                                     TheSeller has taken reasonable steps in accordance with normal industry practiceto maintain the confidentiality of the trade secrets and other confidentialIntellectual Property used in the Business. To the best knowledge of the Seller, (i) there has been no misappropriationof any Trade Secrets used in the Business by any Person; (ii) no employee,independent contractor or agent of the Seller has misappropriated any TradeSecrets of any other Person in the course of performance as an employee,independent contractor or agent of the Business; and (iii) no employee,independent contractor or agent of the Seller is in material default ormaterial breach of any term of any written employment agreement, nondisclosureagreement, assignment of invention agreement or similar agreement or contractrelating in any way to the protection, ownership, development, use or transferof Intellectual Property.

###  

### (j)                                     TheShared MIS Systems and the Developed Software, together with the OwnedIntellectual Property and the Licensed Intellectual Property, includes all ofthe Software necessary to enable the Business to become a fully operationalentity with all current functionality and appropriate controls to protect theBusiness from any non-Business access. Upon Closing, the Purchaser shall own or otherwise have a valid right touse (on the same terms and conditions that the Seller or Audiovox previouslyhad such right to use) all Shared MIS Systems and Developed Software.

###  

SECTION 3.16. Real Property.  (a)  There are no parcels of Owned Real Propertyused in the Business or included in the Purchased Assets.

 

### (b)                                 TheSeller has not leased or subleased any parcel or any portion of any parcel ofLeased Real Property to any other Person and no other Person has any rights tothe use, occupancy or enjoyment thereof pursuant to any lease, sublease,license, occupancy or other agreement, nor has the Seller assigned its interestunder any lease or sublease of any parcel or any portion of any parcel ofLeased Real Property to any third party.

###  

### (c)                                  Section 3.16(c)of the Disclosure Schedule sets forth a true and complete list of all leasesand subleases relating to the Leased Real Property and any and all materialancillary documents pertaining thereto (including all material amendments,modifications, supplements, exhibits, schedules, addenda and restatementsthereto and thereof and all consents, including consents for alterations,assignments and sublets, documents recording variations, memoranda of lease,options, rights of expansion, extension, first refusal and first offer and

 

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### evidence ofcommencement dates and expiration dates) (such leases, subleases and ancillarydocuments being the “Lease Documents”). The Seller has made available to the Purchaser copies of all writtenLease Documents.  With respect to eachof such leases and subleases, the Seller has not exercised or given any noticeof exercise, nor has any lessor or landlord exercised or received any notice ofexercise by a lessor or landlord of, any option, right of first offer or rightof first refusal contained in any such lease or sublease, including any suchoption or right pertaining to purchase, expansion, renewal, extension orrelocation (collectively, “Options”).

 

### (d)                                 Exceptas disclosed in Section 3.16(d) of the Disclosure Schedule, the interests ofSeller in the Leased Real Property to be transferred pursuant to this Agreementare sufficient for the continued conduct of the Business after the Closing insubstantially the same manner as conducted prior to the Closing.

###  

### (e)                                  Tothe best knowledge of the Seller, all the Leased Real Property is occupiedunder a valid and current certificate of occupancy or similar permit.

###  

### (f)                                    Therental set forth in each lease or sublease of the Leased Real Property is theactual rental being paid, and there are no separate agreements orunderstandings with respect to such rental.

###  

### (g)                                 Exceptas set forth in Schedule 3.16(g) of the Disclosure Schedule, the Seller has thefull right to exercise any Option contained in the leases and subleasespertaining to the Leased Real Property on the terms and conditions containedtherein and upon due exercise would be entitled to enjoy the full benefit ofsuch Options with respect thereto.

###  

### (h)                                 Tothe best knowledge of the Seller, none of the Leased Real Property to betransferred pursuant to this Agreement is the subject of any official complaintor notice of violation of any applicable Law, zoning ordinance, building codeor regulation governing land use, and no such violation exists which detracts fromor interferes with the present use of such properties or impairs the operationsthereon; and there is no Law, zoning ordinance, building code, use or occupancyrestriction or condemnation action or proceeding pending, or, to the bestknowledge of the Seller, threatened with respect to any such Leased RealProperty which would detract from, or interfere with the present use of, suchproperty or impair the operations thereon, as presently conducted.

###  

For purposes of this Section 3.16 and Sections 3.17and 3.18, the term “lease” shall include any and all leases, subleases,sale/leaseback agreements or similar arrangements.

 

SECTION 3.17. Tangible Personal Property. (a)  Section 3.17(a) of theDisclosure Schedule lists (as of the end of the most recent calendar month forwhich such data is available preceding the date of this Agreement) each item ordistinct group of machinery, equipment, tools, supplies, furniture, fixtures,personalty, vehicles, rolling stock and other tangible personal property (the “TangiblePersonal Property”) used in the Business.

 

### (b)                                 TheSeller has the full right to exercise any renewal options contained in theleases and subleases pertaining to the Tangible Personal Property on the termsand conditions contained therein and upon due exercise would be entitled toenjoy the use of each item of leased Tangible Personal Property for the fullterm of such renewal options.

 

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SECTION 3.18. Assets.  (a)  The Seller owns, leases or has the legalright to use all the properties and assets, including the Owned IntellectualProperty, the Licensed Intellectual Property, the Transferred IP Agreements,the Leased Real Property and the Tangible Personal Property, used in theconduct of the Business, and, with respect to contract rights, is a party toand enjoys the right to the benefits of all such contracts, agreements andother arrangements used by the Seller (as such relate to the Business) or in orrelating to the conduct of the Business, all of which properties, assets andrights constitute Purchased Assets (subject to obtaining the third partyconsents and approvals) except for the Excluded Assets.  The Seller has good and marketable title to,or, in the case of leased or subleased Purchased Assets, valid and subsistingleasehold interests in, all the Purchased Assets, free and clear of allEncumbrances, except Permitted Encumbrances.

 

### (b)                                 ThePurchased Assets constitute all the properties, assets and rights forming apart of, used or held in, and all such properties, assets and rights as arenecessary in the conduct of, the Business other than the Excluded IntellectualProperty.

###  

### (c)                                  Followingthe consummation of the transactions contemplated by this Agreement and theexecution of the instruments of transfer contemplated by this Agreement (andsubject to the receipt of required consents and approvals), the Purchaser willown, with good, valid and marketable title, or lease, under valid andsubsisting leases, or otherwise acquire the interests of the Seller in thePurchased Assets, free and clear of any Encumbrances, other than PermittedEncumbrances, and without incurring any penalty or other adverse consequence,including any increase in rentals, royalties, or license or other fees imposedas a result of, or arising from, the consummation of the transactionscontemplated by this Agreement.

###  

SECTION 3.19. Customers.  Listed inSection 3.19 of the Disclosure Schedule are the names and addresses of theten largest customers (by revenue) of the Business for the twelve-month periodended February 29, 2004 and the amount for which each such customer wasinvoiced during such period.  Except asset forth in Section 3.19 of the Disclosure Schedule, the Seller as of the datehereof has not received any notice and has no reason to believe that any suchsignificant customer of the Business has ceased, or will cease, to use theproducts, equipment, goods or services of the Business, or has substantiallyreduced, or will substantially reduce, the use of such products, equipment,goods or services at any time except for reasons which may be attributable tothe Purchaser.

 

SECTION 3.20. Suppliers.  Listed inSection 3.20 of the Disclosure Schedule are the names and addresses ofeach of the ten largest suppliers of raw materials, supplies, merchandise andother goods for the Business for the twelve-month period ended February 29,2004 and the amount for which each such supplier invoiced the Seller duringsuch period.  Except as set forth inSection 3.20 of the Disclosure Schedule, as of the date hereof the Seller hasnot received any notice and has no reason to believe that any such supplierwill not sell raw materials, supplies, merchandise and other goods to thePurchaser at any time after the Closing on terms and conditions substantiallysimilar to those used in its current sales to the Business, subject only togeneral and customary price increases except for reasons which may beattributable to the Purchaser.  Exceptas set forth in Section 3.20 of the Disclosure Schedule, none of the rawmaterials, supplies, merchandise or other goods supplied to the Business aresuch that they are not generally available in the market from more than onesource.

 

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SECTION 3.21.  Employee Benefit Matters. (a)  Plans and MaterialDocuments.  Section 3.21(a) ofthe Disclosure Schedule lists (i) all employee benefit plans (as definedin Section 3(3) of the Employee Retirement Income Security Act of 1974, asamended (“ERISA”)) and all bonus, stock option, stock purchase,restricted stock, incentive, deferred compensation, retiree medical or lifeinsurance, supplemental retirement, severance or other benefit plans, programsor arrangements, and all employment, termination, severance or other contractsor agreements, whether legally enforceable or not, to which the Seller is aparty, with respect to which the Seller has any obligation or which aremaintained, contributed to or sponsored by the Seller, in each case, for thebenefit of any current or former employee, officer or director of the Business,(ii) each employee benefit plan for which the Seller could incur liabilityunder Section 4069 of ERISA in the event such plan has been or were to beterminated, (iii) any plan in respect of which the Seller could incurliability under Section 4212(c) of ERISA, and (iv) any contracts,arrangements or understandings between the Seller or any of its Affiliates andany employee of the Business, including any contracts, arrangements orunderstandings relating to the sale of the Purchased Assets (collectively, the“Plans”); provided, that there shall be no obligation to list in Section3.21(a) of the Disclosure Schedule any Plan that is not material.  The Seller has furnished to the Purchaser acomplete and accurate copy of each Plan that is in writing and a complete andaccurate copy of each material document prepared in connection with each suchPlan, including a copy of (i) each trust or other funding arrangement,(ii) each summary plan description and summary of material modifications,(iii) the most recently filed IRS Form 5500, (iv) the mostrecently received IRS determination letter for each such Plan, and (v) themost recently prepared actuarial report and financial statement in connectionwith each such Plan.  Except as setforth in Section 3.21(a) of the Disclosure Schedule or as permitted to beexcluded from the definition of Plan, there are no other employee benefitplans, programs, arrangements or agreements, whether formal or informal, whetherin writing or not, to which the Seller is a party, with respect to which theSeller has any obligation or which are maintained, contributed to or sponsoredby the Seller, in each case, for the benefit of any current or former employee,officer or director of the Business. The Seller has no express or implied commitment, whether legallyenforceable or not, to (i) create or incur liability with respect to orcause to exist any other employee benefit plan, program or arrangement,(ii) to enter into any contract or agreement to provide compensation orbenefits to any individual, or (iii) to modify, change or terminate anyPlan, other than with respect to a modification, change or termination requiredby ERISA or the Code, in each of the foregoing cases, for the benefit of anycurrent or former employee, officer or director of the Business.

 

### (b)                                 Absenceof Certain Types of Plans.  None ofthe Plans is subject to Title IV of ERISA or Section 412 of the Code and noneof the Company, ACC or any of their ERISA Affiliates currently contributes to,or during any time during the last six years had an obligation to contributeto, or has any liability to a plan subject to Title IV of ERISA or Section 412of the Code.  Except as set forth inSection 3.21(b) of the Disclosure Schedule, none of the Plans provides for thepayment of separation, severance, termination or similar-type benefits to anyPerson or obligates the Seller to pay separation, severance, termination orsimilar-type benefits solely as a result of any transaction contemplated bythis Agreement or as a result of a change in control.  Except as set forth in Section 3.21(b) of the DisclosureSchedule, none of the Plans provides for or promises retiree medical, disabilityor life insurance benefits to any current or former employee, officer ordirector of the Business, other than COBRA continuation coverage.

 

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### Except as setforth in Section 3.21(b) of the Disclosure Schedule, each of the Plans issubject only to the Laws of the United States or a political subdivisionthereof.

###  

### (c)                                  Compliancewith Applicable Law.  Each Plan hasbeen operated in all material respects in accordance with the requirements ofall applicable Law, including ERISA and the Code, and the Seller and, to theknowledge of the Seller after discharging its fiduciary duty to satisfy any dueinquiry, all Persons who participate in the operation of such Plans and allPlan “fiduciaries” (within the meaning of Section 3(21) of ERISA) have actedin all material respects  in accordancewith the provisions of all applicable Law, including ERISA and the Code.  The Seller has performed all obligationsrequired to be performed by it under, is not in any respect in default under orin violation of, and has no knowledge of any default or violation by any partyto, any Plan, in each case as would not result in any material liability to theSeller or the Business.  No Action ispending or, to the best knowledge of the Seller, threatened with respect to anyPlan (other than claims for benefits in the ordinary course) and, to theknowledge of the Seller, no fact or event exists that could give rise to anysuch Action.

###  

### (d)                                 Qualificationof Certain Plans.  Each Plan that isintended to be qualified under Section 401(a) of the Code orSection 401(k) of the Code has received a favorable determination letterfrom the IRS that it is so qualified, and each trust established in connectionwith any Plan that is intended to be exempt from federal income taxation underSection 501(a) of the Code has received a determination letter from theIRS that it is so exempt, and, to the knowledge of the Seller, no fact or eventhas occurred since the date of such determination letter from the IRS toadversely affect the qualified status of any such Plan or the exempt status ofany such trust.  Each trust maintainedor contributed to by the Seller or any of its ERISA Affiliates that is intendedto be qualified as a voluntary employees’ beneficiary association and that isintended to be exempt from federal income taxation under Section 501(c)(9)of the Code has received a favorable determination letter from the IRS that itis so qualified and so exempt, and, to the knowledge of the Seller, no fact orevent has occurred since the date of such determination by the IRS to adverselyaffect such qualified or exempt status.

###  

### (e)                                  Absenceof Certain Liabilities and Events. The Seller has engaged in no, and, to the knowledge of the Seller, therehas been no, prohibited transaction (within the meaning of Section 406 ofERISA or Section 4975 of the Code) with respect to any Plan.  Neither the Seller nor any of its ERISAAffiliates has incurred any liability for any penalty or tax arising under Section 4971,4972, 4980, 4980B or 6652 of the Code or any liability under Section 502of ERISA, and, to the knowledge of the Seller, no fact or event exists thatcould give rise to any such liability.

###  

SECTION 3.22. Labor Matters.  The Selleris not a party to any collective bargaining agreement or other labor unioncontract applicable to persons employed by the Seller in connection with theBusiness, and to the best knowledge of the Seller currently there are noorganizational campaigns, petitions or other unionization activities seekingrecognition of a collective bargaining unit which could affect theBusiness.  There are no strikes,slowdowns, work stoppages or material controversies pending or, to the bestknowledge of the Seller, threatened between the Seller and any employees of theBusiness, and the Seller has not experienced any such strike, slowdown or workstoppage or material controversies within the past three years.  There are no unfair labor practicecomplaints pending against the Seller before

 

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the National LaborRelations Board or any other Governmental Authority or any current unionrepresentation questions involving Persons employed by or, to the bestknowledge of the Seller, otherwise providing services for the Seller inconnection with the Business.  TheSeller with respect to the Business is currently in material compliance withall applicable Laws relating to the employment of labor, including thoserelated to wages, hours, collective bargaining and the payment and withholdingof Taxes and other sums as required by the appropriate Governmental Authorityand has withheld and paid to the appropriate Governmental Authority or isholding for payment not yet due to such Governmental Authority all materialamounts required to be withheld from employees of the Business and is notliable for any material arrears of wages, Taxes, penalties or other sums forfailure to comply with any of the foregoing. The Seller has in all material respects paid in full to all the Personsemployed by or otherwise performing services for the Business or adequatelyaccrued for in accordance with GAAP all wages, salaries, commissions, bonuses,benefits and other compensation due to or on behalf of such Persons.  There is no material claim with respect topayment of wages, salary or overtime pay that has been asserted or is nowpending or, to the best knowledge of the Seller, threatened, in each case,before any Governmental Authority with respect to any current or formeremployee of the Business.  The Seller isnot a party to, or otherwise bound by, any consent decree with, or citation by,any Governmental Authority relating to employees or employment practices withrespect to the Business.  Except as setforth in Section 3.22 of the Disclosure Schedule, there is no charge orproceeding with respect to a material violation of any occupational safety orhealth standard that has been asserted or is now pending or, to the bestknowledge of the Seller, threatened with respect to the Business.  Except as set forth in Section 3.22 of theDisclosure Schedule, there is no charge of discrimination in employment oremployment practices with respect to the Business, for any reason, includingage, gender, race, religion or other legally protected category, which has beenasserted or is now pending before the United States Equal EmploymentOpportunity Commission, or any other Governmental Authority in any jurisdictionin which the Seller has employed or currently employs any Person in connectionwith the Business nor, to the best knowledge of the Seller has any such chargebeen threatened.  Except as set forth inSection 3.22 of the Disclosure Schedule, to the best knowledge of the Seller,the Seller has not used, in connection with the Business, the services ofworkers provided by third party contract labor suppliers, temporary employees,“leased employees” (as that term is defined in Section 414(n) of the Code), orPersons who have provided services as independent contractors, to an extentthat could reasonably be expected to result in the disqualification of any Planunder applicable Law, or the imposition of penalties or excise Taxes withrespect to any Plan by the IRS, the U.S. Department of Labor or any otherGovernmental Authority, or a claim by such Person for participation or eligibilityfor benefits under any Plan.

 

SECTION 3.23. Key Employees.  (a)  Section 3.23 of the Disclosure Schedulelists, for each employee of the Business, the name, title, place of employment,hire date, actual W-2 compensation for 2002 and 2003 and annualizedcompensation for 2004, accrued vacation and sick leave and paid time off as ofthe date of this Agreement and a description of the position and job functionof each current salaried employee of the Seller who is employed or retained inconnection with the Business and whose annual compensation exceeded (or, in2004, is expected to exceed) $75,000.

 

### (b)                                 Exceptas set forth in Section 3.23(b) of the Disclosure Schedule, no director,officer, management employee or technical and professional Person who isemployed

 

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### by or whootherwise perform services for the Seller in connection with the Business areunder written obligation to the Seller to maintain in confidence allconfidential or proprietary information acquired by them in the course of theiremployment and to assign to the Seller all inventions made by them within thescope of their employment during such employment and for a reasonable periodthereafter.

###  

SECTION 3.24. Certain Interests.  Exceptas set forth in Section 3.24 of the Disclosure Schedule, to the bestknowledge of the Seller, no stockholder, officer or director of the Seller andno relative or spouse (or relative of such spouse) who resides with, or is adependent of, any such stockholder, officer or director:

 

#### (a)                                  hasany direct or indirect material financial interest in any competitor, supplieror customer of the Business; provided, however, that theownership of securities representing no more than one percent of theoutstanding voting power of any competitor, supplier or customer and that arealso listed on any national securities exchange, shall not be deemed to be a“financial interest” so long as the Person owning such securities has no otherconnection or relationship with such competitor, supplier or customer;

####  

#### (b)                                 owns,directly or indirectly, in whole or in part, or has any other interest in anytangible or intangible property that the Seller uses in the conduct of theBusiness; or

####  

#### (c)                                  hasoutstanding any Indebtedness to the Seller.

####  

SECTION 3.25. Taxes.  Except as setforth in Section 3.25 of the Disclosure Schedule, (a) all Tax Returns requiredto be filed by or with respect to the Seller, the Purchased Assets or theBusiness (including any consolidated, combined or unitary Tax Return thatincludes the Seller) have been timely filed, and taxes in connection therewithhave been timely paid; (b) all such Tax Returns are true, correct andcomplete in all material respects; (c) no adjustment relating to such TaxReturns has been proposed formally or informally by any Governmental Authorityand, to the best knowledge of the Seller, no basis exists for any suchadjustment; (d) there are no pending or, to the best knowledge of the Seller,threatened Actions for the assessment or collection of Taxes against theSeller, the Purchased Assets or the Business or any Person that was included inthe filing of a Tax Return with the Seller on a consolidated, combined orunitary basis; (e) there are noTax liens on any of the Purchased Assets; (f) there are no requests forinformation outstanding that could affect the Taxes relating to the PurchasedAssets or the Business; (g) the Seller has not received any notice or inquiryfrom any jurisdiction where the Seller does not currently file Tax Returns tothe effect that such filings may be required with respect to the PurchasedAssets or the Business or that the Purchased Assets or the Business mayotherwise be subject to taxation by such jurisdiction; (h) the Seller hasproperly and timely withheld, collected or deposited all amounts required to bewithheld, collected or deposited in respect of Taxes and (i) to the bestknowledge of the Seller, there are no Tax investigations, inquiries or auditsby any Tax authority in progress relating to the Purchased Assets or theBusiness, nor has the Seller received any written notice indicating that aGovernmental Authority intends to conduct such an audit or investigation.

 

SECTION 3.26. Insurance.  Set forth inSection 3.26 of the Disclosure Schedule is a list of all material insurancepolicies related to the Business, which policies cover all material

 

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assets, properties andreasonably anticipated risks of the Business. All such policies are in full force and effect, all premiums due thereonhave been paid and the Seller has complied in all material respects with theprovisions of such policies.  Noproceeding is pending or, to the best knowledge of the Seller, threatened torevoke or cancel or limit such policies and no notice of cancellation of anysuch policies has been received by the Seller.

 

SECTION 3.27. Certain Business Practices. Except as set forth in Section 3.27 of the Disclosure Schedule, neitherthe Seller nor any of its directors, officers, agents, representatives oremployees (in their capacity as directors, officers, agents, representatives oremployees) has:  (a) used any funds forunlawful contributions, gifts, entertainment or other unlawful expensesrelating to political activity in respect of the Business; (b) directly orindirectly, paid or delivered any fee, commission or other sum of money or itemof property, however characterized, to any finder, agent, or other party actingon behalf of or under the auspices of a governmental official or GovernmentalAuthority, in the United States or any other country, which is in any mannerillegal under any Law of the United States or any other country havingjurisdiction; or (c) made any payment to any customer or supplier of the Selleror any officer, director, partner, employee or agent of any such customer orofficer, director, partner, employee or agent for the unlawful reciprocalpractice, or made any other unlawful payment or given any other unlawfulconsideration to any such customer or supplier or any such officer, director,partner, employee or agent, in respect of the Business.

 

SECTION 3.28. INTENTIONALLY OMITTED.

 

SECTION 3.29. Brokers.  Except forJefferies & Company, Inc., no broker, finder or investment banker isentitled to any brokerage, finder’s or other fee or commission in connectionwith the transactions contemplated by this Agreement or the AncillaryAgreements based upon arrangements made by or on behalf of the Seller or itsAffiliates.  The Seller is solelyresponsible for the fees and expenses of Jefferies & Company, Inc.

 

SECTION 3.30. Board Approval; Vote Required. (a)  The Board of Directors ofAudiovox (the “Audiovox Board”), by resolutions duly adopted byunanimous vote of those voting at a meeting duly called and held and notsubsequently rescinded or modified in any way, has duly (i) determinedthat this Agreement and the transactions contemplated hereby are fair to and inthe best interests of Audiovox and its stockholders, (ii) approved thisAgreement and the transactions contemplated hereby and declared theiradvisability and (iii) recommended that the stockholders of Audiovoxapprove and adopt this Agreement and approve the transactions contemplatedhereby and directed that this Agreement and the transactions contemplatedhereby be submitted for consideration by Audiovox’s stockholders at theAudiovox Stockholders’ Meeting (as hereinafter defined).

 

### (b)                                 Theonly vote of the holders of any class or series of capital stock of Audiovoxnecessary to approve this Agreement and the transactions contemplated hereby isthe affirmative vote of the holders of a majority of the votes under theoutstanding shares of Class A common stock and Class B common stock of Audiovoxvoting as a single class in favor of the approval and adoption of thisAgreement.

 

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# ARTICLE IVREPRESENTATIONS AND WARRANTIESOF THE PURCHASER

#  

As an inducement to the Seller to enter into thisAgreement, the Purchaser hereby represents and warrants to the Seller asfollows:

 

SECTION 4.01. Organization and Authority of the Purchaser.  The Purchaser is a corporation dulyorganized, validly existing and in good standing under the laws of thejurisdiction of its incorporation and has all necessary corporate power andauthority to enter into this Agreement and the Ancillary Agreements to which itis a party, to carry out its obligations hereunder and thereunder and toconsummate the transactions contemplated hereby and thereby.  The execution and delivery by the Purchaserof this Agreement and the Ancillary Agreements to which it is a party, theperformance by the Purchaser of its obligations hereunder and thereunder andthe consummation by the Purchaser of the transactions contemplated hereby andthereby have been duly authorized by all requisite corporate action on the partof the Purchaser.  This Agreement hasbeen, and upon their execution the Ancillary Agreements to which the Purchaseris a party shall have been, duly executed and delivered by the Purchaser, and(assuming due authorization, execution and delivery by the Seller) thisAgreement constitutes, and upon their execution the Ancillary Agreements towhich the Purchaser is a party shall constitute, legal, valid and bindingobligations of the Purchaser, enforceable against the Purchaser in accordancewith their respective terms.

 

SECTION 4.02. No Conflict.  Assumingcompliance with the pre-merger notification and waiting period requirements ofthe HSR Act and the making and obtaining of all filings, notifications,consents, approvals, authorizations and other actions referred to inSection 4.03, except as may result from any facts or circumstancesrelating solely to the Seller, the execution, delivery and performance by thePurchaser of this Agreement and the Ancillary Agreements to which it is a partydo not and will not (a) violate, conflict with or result in the breach ofany provision of the Certificate of Incorporation or By-laws of the Purchaser,(b) conflict with or violate any material Law or Governmental Orderapplicable to the Purchaser or (c) conflict with, or result in any breachof, constitute a default (or event which with the giving of notice or lapse oftime, or both, would become a default) under, require any consent under, or giveto others any rights of termination, amendment, acceleration, suspension,revocation or cancellation of, any material note, bond, mortgage or indenture,contract, agreement, lease, sublease, license, permit, franchise or otherinstrument or arrangement to which the Purchaser is a party, which wouldadversely affect the ability of the Purchaser to carry out its obligationsunder, and to consummate the transactions contemplated by, this Agreement orthe Ancillary Agreements.

 

SECTION 4.03. Governmental Consents and Approvals.  The execution, delivery and performance by the Purchaser of thisAgreement and each Ancillary Agreement to which the Purchaser is a party do notand will not require any material consent, approval, authorization or otherorder of, action by, filing with, or notification to any Governmental Authorityapplicable to the Purchaser, except (a) as described in a writing given tothe Seller by the Purchaser on the

 

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date of this Agreement,(b) the pre-merger notification and waiting period requirements of the HSRAct and (c) the applicable antitrust approvals in the Peoples Republic ofChina.

 

SECTION 4.04. Financing.  The Purchaserhas, and at the Closing will have, all funds necessary to consummate all thetransactions contemplated by this Agreement and the Ancillary Agreements.

 

SECTION 4.05. Litigation.  Except as setforth in a writing given to the Seller by the Purchaser on the date of thisAgreement, no Action by or against the Purchaser is pending or, to the bestknowledge of the Purchaser, threatened, which would materially and adverselyaffect the legality, validity or enforceability of this Agreement, anyAncillary Agreement or the consummation of the transactions contemplated herebyor thereby.

 

SECTION 4.06. Brokers.  Except forMerrill Lynch, Pierce, Fenner & Smith Incorporated, no broker, finder orinvestment banker is entitled to any brokerage, finder’s or other fee orcommission in connection with the transactions contemplated by this Agreementbased upon arrangements made by or on behalf of the Purchaser.  The Purchaser shall be solely responsiblefor payment of the fees and expenses of Merrill Lynch, Pierce, Fenner &Smith Incorporated.

 

SECTION 4.07. UTStarcom Canada. UTStarcom Canada is registered in Canada and in the Province of Ontarioand is eligible to apply for the certificates necessary to exempt either theSeller or the Purchaser from paying GST and PST taxes in Canada and in theProvince of Ontario as a result of the transactions contemplated by thisAgreement.

 

# ARTICLE VADDITIONAL AGREEMENTS

#  

SECTION 5.01. Conduct of Business Prior to the Closing.  (a) The Seller covenants and agrees that, except as described inSection 5.01(a) of the Disclosure Schedule, between the date hereof andthe time of the Closing, the Seller shall not conduct the Business other thanin the ordinary course and consistent with the Seller’s prior practice.  Without limiting the generality of theforegoing, except as described in Section 5.01(a) of the DisclosureSchedule, the Seller shall (as it relates to the Business) (i) continueits advertising and promotional activities, and pricing and purchasingpolicies, in accordance with past practice and good business judgment;(ii) not shorten or lengthen the customary payment cycles for any of itspayables or receivables; (iii) use its reasonable commercial efforts to(A) preserve intact the business organization of the Business,(B) keep available to the Purchaser (without any obligation to increasetheir compensation) the services of the employees of the Seller to whom offersof employment are to be made pursuant to Section 6.01, (C) continue infull force and effect without material modification all existing policies orbinders of insurance currently maintained in respect of the Business and(D) preserve its current relationships with the customers and suppliers ofthe Business and other persons with which the Business has had significantbusiness relationships; (iv) exercise, but only after notice to thePurchaser and receipt of the Purchaser’s prior written approval (not to beunreasonably withheld), any rights of renewal pursuant to the terms of any ofthe leases or subleases set forth in Section 3.16(c) of the

 

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Disclosure Schedule whichby their terms would otherwise expire; and (v) except in accordance withSection 5.06 or Article IX, not engage in any practice, take any action, failto take any action or enter into any transaction which would render it unableto satisfy the condition set forth in Section 7.02(a).

 

### (b)                                 Exceptas described in Section 5.01(b) of the Disclosure Schedule, the Sellercovenants and agrees that, between the date hereof and the time of the Closing,without the prior written consent of the Purchaser (not to be unreasonablywithheld), the Seller will not take any of the actions enumerated in the secondsentence of Section 3.10 and all clauses thereof (other than clauses (k),(u), (x), (z) and (aa), which shall be excluded).

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SECTION 5.02. Access to Information. (a)  From the date hereof untilthe Closing, subject to applicable limitations under confidentiality agreementsto which the Seller is bound, upon reasonable notice, the Seller shall causeits officers, directors, employees, agents, representatives, accountants andcounsel to:  (i) afford theofficers, employees, agents, accountants, counsel, financing sources andrepresentatives of the Purchaser reasonable access, during normal businesshours, to the offices, properties, plants, other facilities, and books andrecords of the Seller relating to the Business and to those officers,directors, employees, agents, accountants and counsel of the Seller who haveany knowledge relating to the Business and (ii) furnish to the officers,employees, agents, accountants, counsel, financing sources and representativesof the Purchaser such additional financial and operating data and otherinformation regarding the assets, properties, liabilities and goodwill of theBusiness (or legible copies thereof) that are reasonably available to theSeller as the Purchaser may from time to time reasonably request.  All information disclosed hereunder shall besubject to the Confidentiality Agreement.

 

### (b)                                 Inorder to facilitate the resolution of any claims made against or incurred bythe Seller, the making of any necessary filing by Audiovox or the Seller or forany other reasonable purpose, for a period of seven years after the Closing,the Purchaser shall (i) retain the books and records relating to theBusiness relating to periods prior to the Closing in a manner reasonablyconsistent with the prior practice of the Seller, (ii) authorize, direct andinstruct its employees with knowledge of such claims to reasonably cooperateand assist the Seller in connection with such claims and (iii) uponreasonable notice, afford the officers, employees, agents and representativesof Audiovox or the Seller reasonable access (including the right to make, atthe Seller’s expense, photocopies), during normal business hours, to such booksand records.

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### (c)                                  Inorder to facilitate the resolution of any claims made by or against or incurredby the Purchaser after the Closing or for any other reasonable purpose, for aperiod of seven years following the Closing, the Seller shall (i) retainthe books and records of the Seller which relate to the Business and itsoperations for periods prior to the Closing and which shall not otherwise havebeen delivered to the Purchaser, (ii) authorize, direct and instruct its employeeswith knowledge of such claims to reasonably cooperate and assist the Purchaserin connection with such claims and (iii) upon reasonable notice, affordthe officers, employees, agents and representatives of the Purchaser reasonableaccess (including the right to make photocopies, at the Purchaser’s expense),during normal business hours, to such books and records.

 

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SECTION 5.03. Confidentiality.  Subjectto the Seller’s rights with respect to the Excluded Assets and the ExcludedLiabilities, the Seller agrees to, and shall cause its agents, representatives,Affiliates, employees, officers and directors to:  (i) treat and hold as confidential (and not disclose orprovide access to any Person to) all information relating to trade secrets,processes, patent applications, product development, price, customer andsupplier lists, pricing and marketing plans, policies and strategies, detailsof client and consultant contracts, operations methods, product developmenttechniques, business acquisition plans, new personnel acquisition plans and allother confidential or proprietary information with respect to the Business,(ii) in the event that the Seller or any such agent, representative,Affiliate, employee, officer or director becomes legally compelled to discloseany such information, provide the Purchaser with prompt written notice of suchrequirement so that the Purchaser may seek a protective order or other remedyor waive compliance with this Section 5.03, and (iii) in the eventthat such protective order or other remedy is not obtained, or the Purchaserwaives compliance with this Section 5.03, furnish only that portion ofsuch confidential information which is legally required to be provided andexercise its reasonable commercial efforts to obtain assurances thatconfidential treatment will be accorded such information; provided, however,that this sentence shall not apply to any information that, (x) at the time ofdisclosure, is available publicly and was not disclosed in breach of thisAgreement by the Seller, its agents, representatives, Affiliates, employees,officers or directors, (y) the Seller reasonably believes is necessary oradvisable in connection with any claim against the Seller or for which theSeller is purportedly responsible, whether by a third party or otherwise or (z)the performance by the Seller of its obligations, or the assertion by theSeller of any of its rights or remedies, under any Acquisition Document; and providedfurther that, with respect to Intellectual Property, specificinformation shall not be deemed to be within the foregoing exception merelybecause it is embraced in general disclosures in the public domain.  In addition, with respect to IntellectualProperty, any combination of features shall not be deemed to be within theforegoing exception merely because the individual features are in the publicdomain unless the combination itself and its principle of operation are in thepublic domain.  Notwithstanding theforegoing, the Seller and its Affiliates may make such disclosures as arerequired under applicable securities or state law or regulation or nationalstock exchange rules or regulations. The Seller agrees and acknowledges that remedies at law for any breachof its obligations under this Section 5.03 are inadequate and that in additionthereto the Purchaser shall be entitled to seek equitable relief, includinginjunction and specific performance, in the event of any such breach.

 

SECTION 5.04. Regulatory and Other Authorizations; Notices and Consents.  (a) The Seller shall use its reasonable commercial efforts to obtain allauthorizations, consents, orders and approvals of all third parties, includingall Governmental Authorities and officials that may be or become reasonablynecessary for its execution and delivery of, and the performance of itsobligations pursuant to, this Agreement and the Ancillary Agreements and willcooperate fully with the Purchaser in promptly seeking to obtain all suchauthorizations, consents, orders and approvals.  Each party hereto agrees to make an appropriate filing, ifnecessary, pursuant to the HSR Act with respect to the transactionscontemplated by this Agreement within ten (10) Business Days of the date hereofand to supply as promptly as practicable to the appropriate GovernmentalAuthorities any additional information and documentary material that may berequested pursuant to the HSR Act.  Thefiling fee for such HSR Act filing shall be borne by the Purchaser.

 

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### (b)                                 TheSeller shall cooperate and use its reasonable commercial efforts to obtain orassist the Purchaser in obtaining such third party consents and estoppelcertificates as may be reasonably necessary or desirable in connection with thetransactions contemplated by this Agreement.

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### (c)                                  ThePurchaser shall cooperate and use all reasonable efforts to assist the Sellerin giving such notices and obtaining such consents and estoppel certificates; provided,however, that the Purchaser shall have no obligation to give anyguarantee or other consideration of any nature in connection with any suchnotice, consent or estoppel certificate or to consent to any change in theterms of any agreement or arrangement which the Purchaser in its solediscretion may deem adverse to the interests of the Purchaser or the Business.

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### (d)                                 TheSeller and the Purchaser agree that, in the event that any consent, approval orauthorization reasonably necessary or desirable to preserve for the Businessany right or benefit under any Assumed Contract is not obtained prior to theClosing, the Seller will, subsequent to the Closing, cooperate with thePurchaser in attempting to obtain such consent, approval or authorization aspromptly thereafter as is reasonably practicable.  If such consent, approval or authorization cannot be obtained,the Seller shall use its reasonable commercial efforts to provide the Purchaserwith, or cause to be provided to the Purchaser, the rights and benefits of theaffected Assumed Contract for the term of such Assumed Contract.  To the extent that any Assumed Contract isnot capable of being assigned, transferred, subleased or sublicensed withoutthe consent or waiver of the other party thereto or any third party including agovernment or governmental unit, or if such assignment, transfer, sublease orsublicense or attempted assignment, transfer, sublease or sublicense wouldconstitute a breach thereof or a violation of any law, decree, order,regulation, or other governmental edict, this Agreement shall not constitute anassignment, transfer, sublease or sublicense thereof, or an attemptedassignment, transfer, sublease or sublicense of any such Assumed Contract.

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### (e)                                  Inusing its reasonable commercial efforts to obtain any authorization, order,consent, approval, assignment, estoppel certificate or waiver hereunder, theSeller shall not be obligated to incur costs, expenses (including third-partylegal fees) and (collectively, “Consent Costs”) which, along with allother Consent Costs incurred by the Seller, (x) exceed $500,000 in theaggregate and (y) are other than one-time costs to be paid in connection withobtaining such authorization, order, consent, approval, assignment orwaiver.  For the sake of clarity,Audiovox shall not have any obligation to incur Consent Costs.

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SECTION 5.05. Notice of Developments. Prior to the Closing, the Seller shall promptly notify the Purchaser (a)in writing of all events, circumstances, facts and occurrences arisingsubsequent to the date of this Agreement which could reasonably be expected toresult in a failure to satisfy the condition set forth in Section 7.02(a) and(b) all other material and adverse developments affecting the Purchased Assets,Liabilities, business, financial condition, operations, results of operations,customer or supplier relations, employee relations, projections or prospects ofthe Business.

 

SECTION 5.06. No Solicitation or Negotiation. (a) Each of the Seller and Audiovox agrees that neither it nor any ofits directors, officers or employees will, and that it will cause its agents,advisors and other representatives (including, without limitation, anyinvestment

 

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banker, attorney oraccountant retained by it), not to, directly or indirectly, (i) solicit,initiate or encourage (including by way of furnishing nonpublic information),or take any other action to facilitate, any inquiries or the making of anyproposal or offer (including, without limitation, any proposal or offer tothe  stockholders of Audiovox) thatconstitutes, or may reasonably be expected to lead to, any CompetingTransaction (as hereinafter defined), or (ii) enter into or maintain orcontinue discussions or negotiations with any person or entity in furtheranceof such inquiries or to obtain a proposal or offer for a Competing Transaction,or (iii) agree to, approve, endorse or recommend any Competing Transaction orenter into any letter of intent or other contract, agreement or commitmentcontemplating or otherwise relating to any Competing Transaction.  The Seller or Audiovox, as applicable, shallnotify the Purchaser as promptly as practicable (and in any event within two(2) days after the Seller or Audiovox, as applicable, attains knowledge thereof),orally and in writing, if any proposal or offer, or any inquiry or contact withany person with respect thereto, regarding a Competing Transaction is made,specifying the material terms and conditions thereof and the identity of theparty making such proposal or offer or inquiry or contact (and the Seller orAudiovox, as applicable, shall notify the Purchaser concerning any materialamendments to such proposal or offer). Audiovox shall provide the Purchaser with forty-eight (48) hours priornotice (or such lesser prior notice as is provided to the members of theAudiovox Board) of any meeting of the Audiovox Board at which the AudiovoxBoard is reasonably expected to consider any Competing Transaction.  The Seller and Audiovox immediately shallcease and cause to be terminated all existing discussions or negotiations withany parties conducted heretofore with respect to a Competing Transaction.  The Seller and Audiovox agree not to,without the prior written consent of the Purchaser, release any Person from, orwaive any provision of, any confidentiality or standstill agreement (unless theAudiovox Board, in order to comply with its fiduciary obligations to Audiovoxand its stockholders under applicable Law, must waive the standstill provisionsso that such Person may make a proposal or offer which may reasonably beexpected to lead to a Superior Proposal) to which the Seller and Audiovox is aparty relating to Audiovox, the Seller or the Purchased Assets.

 

### (b)                                 Notwithstandinganything to the contrary in Section 5.06, the Audiovox Board may furnishinformation to, and enter into discussions with, a Person who has made anunsolicited, written, bona fide proposal or offer regarding a CompetingTransaction, and the Audiovox Board has (i) determined, in its good faithjudgment (after having received the advice of a financial advisor of nationallyrecognized reputation), that such proposal or offer constitutes, or may bereasonably expected to lead to, a Superior Proposal (as hereunder defined),(ii) determined, in its good faith judgment after consultation with independentlegal counsel (who may be Audiovox’s regularly engaged independent legalcounsel), that, in light of such proposal or offer, the furnishing of suchinformation or entering into discussions is required to comply with itsfiduciary obligations to Audiovox and its stockholders under applicable Law,(iii) provided written notice to the Purchaser of its intent to furnishinformation or enter into discussions with such person, and (iv) obtained fromsuch person an executed confidentiality agreement on terms no less favorable toAudiovox than those contained in the Confidentiality Agreement (it beingunderstood that such confidentiality agreement and any related agreements shallnot include any provision calling for any exclusive right to negotiate withsuch party or having the effect of prohibiting Audiovox from satisfying itsobligations under this Agreement).

 

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### (c)                                  Exceptas set forth in this Section 5.06(c), neither the Audiovox Board nor anycommittee thereof shall withdraw or modify, or propose to withdraw or modify,in a manner adverse to the Purchaser, the Audiovox Recommendation (a “Changein the Audiovox Recommendation”) or approve or recommend, or cause orpermit Audiovox to enter into any letter of intent, agreement or obligationwith respect to, any Competing Transaction. Notwithstanding the foregoing, if the Audiovox Board determines, in itsgood faith judgment prior to the time of the Audiovox Stockholders’ Meeting andafter consultation with independent legal counsel (who may be Audiovox’sregularly engaged independent legal counsel), that it is required to make aChange in the Audiovox Recommendation to comply with its fiduciary obligationsto Audiovox and its stockholders under applicable Law, the Audiovox Board maymake a Change in the Audiovox Recommendation to recommend a Superior Proposal,but only (i) after providing written notice to the Purchaser (a “Notice ofSuperior Proposal”) advising Audiovox that the Audiovox Board has receiveda Superior Proposal, specifying the material terms and conditions of suchSuperior Proposal and identifying the person making such Superior Proposal andindicating that the Audiovox Board intends to effect a Change in the AudiovoxRecommendation and the manner in which it intends (or may intend) to do so, and(ii) if the Purchaser does not, within three (3) business days of Purchaser’sreceipt of the Notice of Superior Proposal, make an offer that the AudiovoxBoard determines, in its good faith judgment (after having received the adviceof a financial advisor of nationally recognized reputation) to be at least asfavorable to Audiovox’s stockholders as such Superior Proposal.  Any disclosure that the Audiovox Board maydetermine that it is compelled to make with respect to the receipt of aproposal or offer for a Competing Transaction or otherwise in order to complywith its fiduciary obligations to Audiovox and its stockholders underapplicable Law, including under Rule 14d-9 or 14e-2 of the rules promulgatedunder the Securities Exchange Act of 1934, as amended, will not constitute aviolation of this Agreement.

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### (d)                                 A“Competing Transaction” means any of the following (other than thetransactions contemplated by this Agreement): (i) any merger, consolidation, share exchange, business combination,recapitalization, liquidation, dissolution or other similar transactioninvolving Audiovox or the Seller; (ii) any sale, lease, exchange, transfer orother disposition of all or a substantial part of the assets of Audiovox or theSeller (other than a disposition of the assets of Audiovox that do not comprisethe Purchased Assets); (iii) any sale, exchange, transfer or other dispositionof 15% or more of any class of equity securities of Audiovox or of the Seller;(iv) any tender offer or exchange offer that, if consummated, would result inany person beneficially owning 15% or more of any class of equity securities ofAudiovox or of the Seller; or (v) any solicitation in opposition to approvaland adoption of this Agreement by Audiovox’s stockholders.

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### (e)                                  A“Superior Proposal” means an unsolicited written bona fide offer made bya third party to consummate any of the following transactions:  (i) a merger, consolidation, share exchange,business combination or other similar transaction involving Audiovox or theSeller pursuant to which the stockholders of Audiovox or the Seller, as thecase may be, immediately preceding such transaction would hold less than 50% ofthe equity interest in the surviving or resulting entity of such transaction;(ii) the acquisition by any person or group (including by means of a tenderoffer or an exchange offer or a two-step transaction involving a tender offerfollowed with reasonable promptness by a cash-out merger involving Audiovox),directly or indirectly, of ownership of 51% of the then outstanding shares ofstock of Audiovox

 

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### or 90% of thethen outstanding shares of stock of the Seller, or (iii) an acquisition of 85%of the assets of the Seller, in each case on terms (including conditions toconsummation of the contemplated transaction) that the Audiovox Boarddetermines, in its good faith judgment (after having received the advice of afinancial advisor of nationally recognized reputation), to be more favorable toAudiovox stockholders than transactions contemplated by this Agreement; provided,however, that any such offer shall not be deemed to be a “SuperiorProposal” if any financing required to consummate the transaction contemplatedby such offer is not committed and is not likely in the good faith judgment ofthe Audiovox Board (after having received the advice of a financial advisor ofnationally recognized reputation) to be obtained by such third party on atimely basis.

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SECTION 5.07. Use of Intellectual Property. From and after the Closing, neither the Seller nor any of its Affiliatesshall use any of the Owned Intellectual Property or any of the LicensedIntellectual Property, except for the Excluded Assets.

 

SECTION 5.08. Non-Competition.  (a)  For a period of five years after the Closing(the “Restricted Period”), neither the Seller nor Audiovox shallconduct, directly or indirectly, the Business or, without the prior writtenconsent of the Purchaser, directly or indirectly, own an interest in, manage,operate, control, as a partner, stockholder or otherwise, any Person thatconducts the Business; provided, however, that, (x) for thepurposes of this Section 5.08, ownership of securities having no more than fivepercent of the outstanding voting power of any such Person shall not be deemedto be in violation of this Section 5.08 as long as the Person owning suchsecurities has no other material connection or relationship with, and noexpress ability to effect the management of, such other Person and (y)ownership of a Person hereafter acquired by the Seller or Audiovox thatconducts the Business shall not be deemed a violation of this Section 5.08,provided, that (1) such Person is not engaged primarily in conducting theBusiness, (2) if Audiovox or the Seller, as the case may be, causes that Personto cease conducting the Business within six months of Audiovox or the Sellerbecoming the owner of such Person and (3) such Person shall not use theAudiovox name to promote the Business during such period of ownership byAudiovox or the Seller; and provided, further, that the ownershipinterests described in Section 5.08(a) of the Disclosure Schedule shall not bedeemed to be in violation of this Section 5.08.

 

### (b)                                 Asa separate and independent covenant, the Seller agrees with the Purchaser that,for a period of five years following the Closing, neither the Seller norAudiovox will in any way, directly or indirectly, materially interfere with orattempt to materially interfere with any officers, employees, representativesor agents of the Business or solicit or attempt to solicit any employee of thePurchaser to leave the employ of the Purchaser or violate the terms of theircontracts, or any employment arrangements, with the Purchaser; provided,however, that the foregoing will not prohibit a general solicitation tothe public.

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### (c)                                  TheRestricted Period shall be extended by the length of any period during whichthe Seller or Audiovox is in breach of the terms of this Section 5.08.

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### (d)                                 TheSeller acknowledges that the covenants of the Seller set forth in this Section5.08 are an essential element of this Agreement and that, but for the agreementof the Seller to comply with these covenants, the Purchaser would not haveentered into this

 

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### Agreement.  The Seller acknowledges that this Section5.08 constitutes an independent covenant that shall not be affected byperformance or nonperformance of any other provision of this Agreement by thePurchaser.  The Seller has independentlyconsulted with its counsel and after such consultation agrees that thecovenants set forth in this Section 5.08 are reasonable and proper.

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SECTION 5.09. INTENTIONALLY OMITTED.

 

SECTION 5.10. Bulk Transfer Laws.  ThePurchaser hereby waives compliance by the Seller with any applicable bulk saleor bulk transfer laws of any jurisdiction in connection with the sale of thePurchased Assets to the Purchaser (other than any obligations with respect tothe application of the proceeds therefrom). The Seller agrees to indemnify the Purchaser in accordance with ArticleVIII against any and all liabilities (including any liabilities for Taxes ofSeller as a transferee or otherwise) which may be asserted by third partiesagainst the Purchaser as a result of the Seller’s noncompliance with any suchlaw.

 

SECTION 5.11. Inter-company Arrangements. Prior to the Closing, the Seller shall cause any contract or arrangementthat is disclosed (or should have been disclosed) in Section 3.14(a)(viii) ofthe Disclosure Schedule, other than the Inter-company Payables and thosecontracts or arrangements set forth in Section 5.11 of the Disclosure Schedule,to be terminated.

 

SECTION 5.12. Payments on Behalf of Affiliates.  Payments made or received by the Purchaser pursuant to ArticleII, this Article V or Article VIII hereof shall, in appropriate circumstances,be made on behalf of, or received in trust for the benefit of, the relevantAffiliate of the Purchaser.  ThePurchaser may direct in writing any such payment to be made by or to theappropriate Affiliate, and the Seller shall comply with any such directionreceived at least two Business Days prior to the date such payment is due.

 

SECTION 5.13. Transition Services. Following the Closing, the Seller shall provide, or cause to beprovided, to the Business certain services that are currently provided by theSeller and its Affiliates to the Business, all in accordance with thetransition services agreement substantially in the form attached hereto asExhibit 5.13 (the “Transition Services Agreement”) to be entered into bythe Seller and the Purchaser as of the Closing.

 

SECTION 5.14. Tax Cooperation and Exchange of Information.  Upon the terms set forth in Section 5.02 ofthis Agreement, the Seller and the Purchaser shall provide each other with suchcooperation and information as either of them reasonably may request of theother in filing any Tax Return, amended Tax Return or claim for refund,determining a liability for Taxes or a right to a refund of Taxes,participating in or conducting any audit or other proceeding in respect ofTaxes.  Such cooperation and informationshall include providing copies of relevant Tax Returns or portions thereof,together with accompanying schedules, related work papers and documents intheir possession relating to rulings or other determinations by Taxauthorities.  The Seller and thePurchaser shall make themselves (and shall direct and instruct their respectiveemployees to be) available on a basis mutually convenient to both parties toprovide explanations of any documents or information provided under thisSection 5.14.  Each of the Seller andthe Purchaser shall retain all Tax Returns, schedules and work papers, recordsand other documents

 

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in its possession (or inthe possession of its Affiliates) relating to Tax matters relevant to thePurchased Assets or the Business for each taxable period first ending after theClosing and for all prior taxable periods until the later of (a) theexpiration of the statute of limitations of the taxable periods to which suchTax Returns and other documents relate, without regard to extensions except tothe extent notified by the other party in writing of such extensions for therespective Tax periods, or (b) six years following the due date (withoutextension) for such Tax Returns.  Aftersuch time, before the Seller or the Purchaser shall dispose of any suchdocuments in its possession (or in the possession of its Affiliates), the otherparty shall be given the opportunity, after 90 days’ prior written notice, toremove and retain all or any part of such documents as such other party mayselect (at such other party’s expense). Any information obtained under this Section 5.14 shall be keptconfidential in accordance with Section 5.03, except as may be otherwisenecessary in connection with the filing of Tax Returns or claims for refund orin conducting an audit or other proceeding.

 

The Purchaser shall, in accordance with Section5.02(b), make available the Transferred Employees and direct and instruct suchTransferred Employees to cooperate with the Seller in the resolution of any Taxclaims made against or incurred by the Seller prior to the Closing.

 

SECTION 5.15. Conveyance Taxes.  TheSeller shall be liable for and shall hold the Purchaser harmless against anyConveyance Taxes which become payable in connection with the transactionscontemplated by this Agreement.  TheSeller, after the review and consent by the Purchaser, shall file suchapplications and documents as shall permit any such Conveyance Tax to beassessed and paid on or prior to the Closing in accordance with any availablepre-sale filing procedure.  ThePurchaser shall execute and deliver all instruments and certificates necessaryto enable the Seller to comply with the foregoing.  The Purchaser shall complete and execute resale or otherexemption certificates, if available, with respect to the Purchased Assetsacquired hereunder, and shall provide the Seller with executed copiesthereof.  The Purchaser will use itsreasonable commercial efforts to cooperate with the Seller to take all actionsreasonably necessary or desirable in order to exempt the transactionscontemplated by this Agreement from any GST and PST taxes in Canada and in theProvince of Ontario.

 

SECTION 5.16. Further Action.  (a)  If, after the Closing, the Seller becomesaware of, or the Purchaser brings to the attention of the Seller, any assets ofthe Seller that should have been transferred as of the Closing but were not sotransferred, then such assets shall be transferred to the Purchaser (or to oneor more Affiliates of the Purchaser designated by the Purchaser) as soon aspossible.  This provision, however,shall not limit, in any way, the rights and remedies of the Purchaser underthis Agreement.

 

(b)                                 Eachof the parties hereto shall use all reasonable efforts to take, or cause to betaken, all appropriate action, do or cause to be done all things reasonablynecessary under applicable Law, and to execute and deliver such documents andother papers, as may be required to carry out the provisions of this Agreementand the Ancillary Agreements to which it is a party and consummate and makeeffective the transactions contemplated hereby and thereby.

 

SECTION 5.17. INTENTIONALLY OMITTED.

 

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SECTION 5.18. Proration of Taxes and Certain Charges.  (a)  Except as provided inSection 5.15, all Property Taxes levied with respect to the Purchased Assetsfor any Straddle Period, whether imposed or assessed in the Pre-Closing TaxPeriod or Post-Closing Tax Period, shall be prorated between the Seller and thePurchaser as of 12:01 A.M. on the day after the date of the Closing.  If any Taxes subject to proration are paidby Purchaser, on the one hand, or Seller, on the other hand, the proportionateamount of such Taxes paid (or in the event a refund of any portion of suchTaxes previously paid is received, such refund) shall be paid promptly by (orto) the other after the payment of such Taxes (or promptly following thereceipt of any such refund).

 

### (b)                                 Exceptas otherwise provided in this Agreement, all installments of special assessmentsor other charges on or with respect to the Purchased Assets payable by theSeller for any period in which the Closing shall occur, including, withoutlimitation, base rent, common area maintenance, royalties, all municipal,utility or authority charges for water, sewer, electric or gas charges, garbageor waste removal, and cost of fuel, shall be apportioned as of the Closing andeach party shall pay its proportionate share promptly upon the receipt of anybill, statement or other charge with respect thereto.  If such charges or rates are assessed either based upon time orfor a specified period, such charges or rates shall be prorated between theSeller and the Purchaser as of the 12:01 A.M. on the day after the date of theClosing.  If such charges or rates areassessed based upon usage of utility or similar services, such charges shall beprorated based upon meter readings taken on the date of the Closing.

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### (c)                                  Allrefunds, reimbursements, installments of base rent, additional rent, licensefees or other use related revenue receivable by any party to the extentattributable to the operation of the Business for any period in which theClosing shall occur shall be prorated so that the Seller shall be entitled tothat portion of any such installment applicable to any period from and afterthe day after the date of the Closing, and if Purchaser or Seller, as the casemay be, shall receive any such payments after the date of the Closing, theyshall promptly remit to such other parties their share of such payments.

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### (d)                                 Theprorations pursuant to this Section 5.18 may be calculated after the Closing,as each item to be prorated (including without limitation any such Tax,obligation, assessment, charge, refund, reimbursement, rent installment, fee orrevenue) accrues or comes due, provided that, in any event, any such prorationshall be calculated not later than thirty (30) days after the party requestingproration of any item obtains the information required to calculate suchproration.

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SECTION 5.19. Proxy Statement.  (a)  As promptly as practicable after theexecution of this Agreement, Audiovox shall prepare and file with the SEC theproxy statement to be sent to the stockholders of Audiovox relating to themeeting of the Audiovox stockholders (the “Audiovox Stockholders’ Meeting”)to be held to consider approval and adoption of this Agreement or anyinformation statement to be sent to such stockholders, as appropriate (suchproxy statement or information statement, as amended or supplemented, being referredto herein as the “Proxy Statement”).  The Seller shall furnish all information concerning the Seller asAudiovox may reasonably request in connection with such actions and thepreparation of the Proxy Statement.  Aspromptly as practicable after the execution of this Agreement, Audiovox shallmail the Proxy Statement to its stockholders.

 

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### (b)                                 Exceptas provided in Section 5.06(c), Audiovox covenants that none of the AudiovoxBoard or any committee thereof shall withdraw or modify, or propose to withdrawor modify, in a manner adverse to the Purchaser, the approval or recommendationby the Audiovox Board or any committee thereof of this Agreement, or thetransactions contemplated by this Agreement and the Proxy Statement shallinclude, the recommendation to the stockholders of Audiovox in favor ofapproval and adoption of this Agreement and approval of the transactionscontemplated by this Agreement (the “Audiovox Recommendation”).

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### (c)                                  Audiovoxwill advise the Purchaser, promptly after it receives notice thereof, of anyrequest by the SEC for amendment of the Proxy Statement or comments thereon andresponses thereto or requests by the SEC for additional information.

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### (d)                                 Audiovoxrepresents that the information in the Proxy Statement shall not, at (i) thetime the Proxy Statement (or any amendment thereof or supplement thereto) isfirst mailed to the stockholders of Audiovox, (ii) the time of theAudiovox Stockholders’ Meeting and (iii) the Closing, contain any untruestatement of a material fact or fail to state any material fact required to bestated therein or necessary in order to make the statements therein, in lightof the circumstances under which they were made, not misleading. All documentsthat Audiovox is responsible for filing with the SEC in connection with thisAgreement or the transactions contemplated by this Agreement will comply as toform and substance in all material respects with the applicable requirements ofthe Securities Exchange Act of 1934, as amended, and the rules and regulationsthereunder.

###  

SECTION 5.20. Audiovox Stockholders’ Meeting. Audiovox shall, subject only to such delays as are necessary to enablethe Audiovox Board to discharge its fiduciary obligations in determiningwhether any unsolicited offer or proposal regarding a Competing Transactionconstitutes a Superior Proposal in accordance with Section 5.06 hereof, (i)call and hold the Audiovox Stockholders’ Meeting as promptly as practicable forthe purpose of voting upon the approval and adoption of this Agreement andAudiovox shall use its reasonable best efforts to hold the AudiovoxStockholders’ Meeting as soon as practicable after the date of this Agreementand (ii) use its reasonable best efforts to solicit from its stockholdersproxies in favor of the approval and adoption of this Agreement and shall takeall other action necessary or advisable to secure the required vote or consentof its stockholders.

 

SECTION 5.21.  TrademarkLicense Agreement. Concurrently with the Closing, Audiovox and the Purchaser shall enterinto a trademark license agreement substantially in the form attached hereto asExhibit 5.21 (the “Trademark License Agreement”).

 

SECTION 5.22.  ReplicationService.  On or prior to theClosing, Audiovox and the Seller shall replicate, for the Purchaser, allDeveloped Software, which, together with the Shared MIS Systems, OwnedIntellectual Property and Licensed Intellectual Property, will enable theBusiness to become a fully operational entity with all current functionalityand appropriate controls to protect the Business from any non-Business access(the “Replication Service”).  Allhardware brands and configurations used in the Replication Service shall beapproved by the Purchaser prior to such use. The Purchaser shall pay $70,000 for the Replication Service but in noevent shall the Purchaser be obligated to make any other payments in respect ofthe Replication Service or the resulting replicated environment.

 

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SECTION 5.23.  LimitedUpdating of Disclosure Schedules. At the Closing, the Seller shall, to the extent necessary, updateSections 3.07(b), 3.12(b), 3.14(a), 3.14(b), 3.15(a), 3.16(c), 3.17(a) and 3.26of the Disclosure Schedule (provided, that, in the case of Section 3.14(b) ofthe Disclosure Schedule, the Seller may only update the disclosure as tocontracts which are no longer in full force and effect due to their expirationor termination in accordance with their terms) to reflect information arisingafter the date of this Agreement and the updating of such Sections of theDisclosure Schedule shall not be deemed to be a breach of the representationsand warranties which such disclosures modify except to the extent that (i) theactions giving rise to such updating constitute a breach of Section 5.01 hereofor (ii) the additional information disclosed would have a Material AdverseEffect.

 

SECTION 5.24.  Leases.  Audiovox and the Purchaser shall usereasonable commercial efforts to negotiate and agree upon the form of the 555Wireless Sublease within 45 days after the date of this Agreement.  The Purchaser shall use reasonablecommercial efforts to negotiate and agree upon the form of the Cerritos Leasewithin 45 days after the date of this Agreement.

 

SECTION 5.25.  Section404 Compliance.  (a)  Promptly after the date of this Agreement,the Seller shall retain the Seller’s Reporting Controls Advisors, as outsideadvisors, to work with the Seller to develop and implement the ACC InternalReporting Controls and to satisfy the Interim Milestones.  The Seller shall use its best efforts to (i)satisfy the Interim Milestones and (ii) develop and implement the ACC InternalReporting Controls prior to September 30, 2004.  The Purchaser and the Purchaser’s Reporting Controls Advisorsshall work cooperatively with the Seller and the Seller’s Reporting ControlsAdvisors to provide necessary information on a timely basis to the Sellerconcerning the UTSI Internal Reporting Controls to enable the Seller to developand implement the ACC Internal Reporting Controls, meet the Interim Milestonesand satisfy the condition set forth in Section 7.02(j).  All costs and expenses of the Seller and theSeller’s Reporting Controls Advisors relating to the development andimplementation of the ACC Internal Reporting Controls shall be borne by theSeller.

 

### (b)                                 Inthe event that the Purchaser shall not have made the Determination ofSatisfactory Controls by September 30, 2004, the Purchaser and the Seller agreethat the Seller shall no longer be obligated hereunder to develop and implementthe ACC Internal Reporting Controls.

###  

# ARTICLE VIEMPLOYEE MATTERS

#  

SECTION 6.01. Offer of Employment.  Asof the Closing, the Purchaser shall offer employment to each of the then-currentemployees of the Seller listed on Section 6.01 of the Disclosure Scheduleproviding for employee benefits (other than equity compensation arrangements)on terms that are no less favorable than the terms and conditions applicable tosimilarly situated employees of the Purchaser, it being understood that suchemployees shall receive credit for all prior periods of service with the Sellerfor purposes of participation in compensation and employee benefit plans,programs or arrangements of the Purchaser; provided, however,that such crediting of service shall not operate to duplicate any benefit orthe funding

 

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of any such benefit.  At Closing, Purchaser shall hire allemployees who accept such offer of employment. As used herein, “Transferred Employee” shall mean each employeewho accepts such offer.  In addition,the Purchaser agrees to (i) credit each of the Transferred Employees with anumber of paid vacation, sick leave and personal days immediately following thedate of Closing equal to the number of such days each such Transferred Employeehas accrued but not used as of the date of Closing under the applicablepolicies of the Seller as in effect immediately prior to the date of Closing,and (ii) allow each of the Transferred Employees to use such days following thedate of Closing in accordance with the applicable policies of the Purchaser asare in effect from time to time.  ThePurchaser and Seller shall undertake in good faith to consider the preparationand filing of employment tax reports with respect to the Transferred Employeesusing the alternative procedure set forth in Revenue Procedure 96-60 under theCode.

 

# ARTICLE VIICONDITIONS TO CLOSING

#  

SECTION 7.01. Conditions to Obligations of the Seller and Audiovox.  The obligations of the Seller and Audiovoxto consummate the transactions contemplated by this Agreement shall be subjectto the fulfillment or written waiver by Audiovox or the Seller, at or prior tothe Closing, of each of the following conditions:

 

#### (a)                                  Representations,Warranties and Covenants.  Therepresentations and warranties of the Purchaser contained in this Agreementshall have been true and correct when made and shall be true and correct at andas of the Closing (disregarding for these purposes any materiality or corollaryqualifications contained therein), except to the extent that any failures ofsuch representations and warranties to be so true and correct would not have aPurchaser Material Adverse Effect, except to the extent such representationsand warranties are as of another date, in which case, such representations andwarranties shall be true and correct as of that date with the same force andeffect as if made as of the Closing except to the extent that any failures ofsuch representations and warranties to be true and correct that would not havea Purchaser Material Adverse Effect, and the covenants and agreements containedin this Agreement to be complied with by the Purchaser on or before the Closingshall have been complied with in all material respects;

####  

#### (b)                                 HSRAct.  Any waiting period (and anyextension thereof) under the HSR Act applicable to the purchase of thePurchased Assets contemplated by this Agreement shall have expired or shallhave been terminated and the applicable approvals and/or clearances withrespect to the antitrust review in the Peoples Republic of China (the “PRCAntitrust Approvals”) have been received;

####  

#### (c)                                  NoProceeding or Litigation.  No Actionshall have been commenced by or before any Governmental Authority against anyof Audiovox, the Seller or the Purchaser, seeking to restrain or materially andadversely alter the transactions contemplated by this Agreement which, in thereasonable, good faith determination of the Seller, is likely to render itimpossible or unlawful to consummate such transactions;

 

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#### provided,however, that the provisions of this Section 7.01(c) shall notapply if the Seller has directly or indirectly solicited or encouraged any suchAction; and

####  

(d)                                 AudiovoxStockholders’ Approval.  ThisAgreement and the transactions contemplated by this Agreement have beenapproved and adopted by the requisite affirmative vote of the stockholders ofAudiovox in accordance with the General Corporation Law of Delaware, andAudiovox’s certificate of incorporation, and such approval shall not have beenrescinded, revoked or otherwise withdrawn.

 

SECTION 7.02. Conditions to Obligations of the Purchaser.  The obligations of the Purchaser toconsummate the transactions contemplated by this Agreement shall be subject tothe fulfillment or written waiver by the Purchaser, at or prior to the Closing,of each of the following conditions:

 

#### (a)                                  Representations,Warranties and Covenants.  Therepresentations and warranties of the Seller and Audiovox contained in thisAgreement shall have been true and correct when made and shall be true andcorrect at and as of the Closing (disregarding for these purposes anymateriality, Material Adverse Effect or corollary qualifications containedtherein), except to the extent that any failures of such representations andwarranties to be so true and correct would not have a Material Adverse Effect,except to the extent such representations and warranties are as of anotherdate, in which case, such representations and warranties shall be true andcorrect as of that date with the same force and effect as if made as of theClosing except to the extent that any failures of such representations andwarranties to be true and correct that would not have a Material AdverseEffect, and the covenants and agreements contained in this Agreement to becomplied with by the Seller and Audiovox on or before the Closing shall havebeen complied with in all material respects;

####  

#### (b)                                 HSRAct.  Any waiting period (and anyextension thereof) under the HSR Act applicable to the purchase of thePurchased Assets contemplated by this Agreement shall have expired or shallhave been terminated and the PRC Antitrust Approvals have been received];

####  

#### (c)                                  NoProceeding or Litigation.  No Actionshall have been commenced by or before any Governmental Authority against anyof Audiovox, the Seller or the Purchaser, seeking to restrain or materially andadversely alter the transactions contemplated by this Agreement which, in thereasonable, good faith determination of the Purchaser, is likely to render itimpossible or unlawful to consummate such transactions or which is reasonablylikely to have a Material Adverse Effect; provided, however, thatthe provisions of this Section 7.02(c) shall not apply if the Purchaserhas directly or indirectly solicited or encouraged any such Action;

####  

#### (d)                                 GovernmentalConsents and Approvals.  ThePurchaser and the Seller shall have received, each in form and substancereasonably satisfactory to the Purchaser, (i) all authorizations, consents,orders and approvals of all Governmental Authorities and officials which arenecessary for the consummation of the transactions contemplated by thisAgreement and the Ancillary Agreements;

 

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#### (e)                                  ThirdParty Consents and Approvals. With respect to each agreement listed inSection 7.02(e)(i) of the Disclosure Schedule, the Purchaser or Seller shallhave received either (x) consent that such agreement may be assigned to thePurchaser in connection with the transactions contemplated by this Agreement or(y) the opportunity to enter into a new agreement that is, in the aggregate,not materially less favorable to Purchaser than, on the date of the Closing, isthe agreement that it is replacing. With respect to three of the five agreements listed in Section7.02(e)(ii) of the Disclosure Schedule, the Purchaser or Seller shall havereceived (x) consent that such agreement may be assigned to the Purchaser inconnection with the transactions contemplated by this Agreement or (y) theopportunity to enter into a new agreement that is, in the aggregate, notmaterially less favorable to Purchaser than, on the date of the Closing, is theagreement that it is replacing.

####  

#### (f)                                    EmploymentAgreements.  The EmploymentAgreement shall have been validly entered into and shall be in full force andeffect and Philip Christopher shall, as of Closing, become an employee of thePurchaser; and

####  

#### (g)                                 KeyEmployees.  At least 80% of the keyemployees listed in Section 7.02(g) of the Disclosure Schedule (“KeyEmployees”) to whom the Purchaser extended offers of employment prior tothe Closing shall have accepted the Purchaser’s offer of employment and shall,as of Closing, become employees of the Purchaser.

####  

#### (h)                                 AudiovoxStockholders’ Approval.  ThisAgreement and the transactions contemplated by this Agreement have beenapproved and adopted by the requisite affirmative vote of the stockholders ofAudiovox in accordance with the General Corporation Law of Delaware, andAudiovox’s certificate of incorporation, and such approval shall not have beenrescinded, revoked or otherwise withdrawn.

####  

#### (i)                                     Leases.  (i) Audiovox and thePurchaser shall have entered into a sublease agreement (the “555 WirelessSublease”) for space at 555 Wireless Blvd., Hauppauge, New York in a formmutually agreed by the parties on the terms set forth in Exhibit 7.02(i)(i)and (ii) Marquardt Associates and the Purchaser shall have entered into a leaseagreement (the “Cerritos Lease”) for space at 16820 Marquardt Avenue,Cerritos, California in a form mutually agreed by the parties on the terms setforth in Exhibit 7.02(i)(ii).

####  

#### (j)                                     Section404 Compliance.  The Purchaser shallhave made the Determination of Satisfactory Controls on or before September 30,2004; provided, that, from and after January 1, 2005, thisSection 7.02(j) shall no longer be a condition to the Purchaser’s obligation toconsummate the transactions contemplated by this Agreement

####  

# ARTICLE VIIIINDEMNIFICATION

#  

SECTION 8.01. Survival of Representations and Warranties.  (a) The representations and warranties of the Seller and Audiovox containedin this Agreement and the

 

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Ancillary Agreementsshall survive the Closing until the second anniversary of the Closing; provided,however, that (i) the representations and warranties made pursuantto Sections 3.01 and 3.29 shall survive indefinitely and (ii) therepresentations and warranties dealing with Tax matters shall survive until 120days after the expiration of the relevant statute of limitations for the Taxliabilities in question.  Neither theperiod of survival nor the liability of the Seller and Audiovox with respect tothe Seller’s and Audiovox’s representations and warranties shall be reduced byany investigation made at any time by or on behalf of the Purchaser.  If written notice of a claim has been givenprior to the expiration of the applicable representations and warranties by thePurchaser to the Seller and Audiovox, then the relevant representations andwarranties shall survive as to such claim, until such claim has been finallyresolved.

 

(b)                                 Therepresentations and warranties of the Purchaser contained in this Agreement andthe Ancillary Agreements shall survive the Closing until the second anniversaryof the Closing.  Neither the period ofsurvival nor the liability of the Purchaser with respect to the Purchaser’srepresentations and warranties shall be reduced by any investigation made atany time by or on behalf of the Seller. If written notice of a claim has been given prior to the expiration ofthe applicable representations and warranties by the Seller to the Purchaser,then the relevant representations and warranties shall survive as to suchclaim, until such claim has been finally resolved.

 

SECTION 8.02. Indemnification by the Seller and Audiovox.  If the Closing shall occur, the Purchaserand its Affiliates, officers, directors, employees, agents, successors andassigns (each a “Purchaser Indemnified Party”) shall be indemnified andheld harmless by the Seller and Audiovox, on a joint and several basis, for andagainst any and all Liabilities, losses, damages, claims, costs and expenses,interest, awards, judgments and penalties (including attorneys’ andconsultants’ fees and expenses) actually suffered or incurred by them(including any Action brought or otherwise initiated by any of them)(hereinafter a “Loss”), arising out of or resulting from:

 

(a)                                  the breach of anyrepresentation or warranty made by the Seller contained in the Acquisition Documents;

 

(b)                                 thebreach of any covenant or agreement by the Seller contained in the AcquisitionDocuments;

 

(c)                                  anyclaim or cause of action of any third party relating to any action, inaction,event, condition, liability or obligation of the Seller occurring or existingprior to the Closing (other than the Assumed Liabilities); and

 

(d)                                 theExcluded Liabilities.

 

To the extent that the Seller’s or Audiovox’sundertakings set forth in this Section 8.02 may be unenforceable, theSeller or Audiovox, as the case may be, shall contribute the maximum amountthat it is permitted to contribute under applicable Law to the payment andsatisfaction of all Losses incurred by the Purchaser Indemnified Parties,provided, that, in no event shall the Seller’s or Audiovox’s liability exceedthe amounts set forth in Section 8.04 hereof.

 

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SECTION 8.03. Indemnification by the Purchaser.  If the Closing shall occur, the Seller and its Affiliates,officers, directors, employees, agents, successors and assigns (each a “SellerIndemnified Party”) shall be indemnified and held harmless by the Purchaserfor and against any and all Losses, arising out of or resulting from:

 

(a)                                  thebreach of any representation or warranty made by the Purchaser contained in theAcquisition Documents;

 

(b)                                 thebreach of any covenant or agreement by the Purchaser contained in theAcquisition Documents;

 

(c)                                  Liabilities,whether arising before or after the Closing, that are expressly assumed by thePurchaser pursuant to this Agreement, including the Assumed Liabilities;

 

(d)                                 Taxes,other than the Excluded Taxes, relating to the Purchased Assets, the Businessor the Assumed Liabilities for any Post-Closing Tax Period;

 

(e)                                  claimsarising after the Closing made by Transferred Employees relating to theiremployment with the Purchaser; and

 

(f)                                    anyclaim or cause of action by any third party relating to any action, inaction, event,condition, liability or obligation relating to the operation of the Businessfrom and after the Closing.

 

To the extent that thePurchaser’s undertakings set forth in this Section 8.03 may beunenforceable, the Purchaser shall contribute the maximum amount that it ispermitted to contribute under applicable Law to the payment and satisfaction ofall Losses incurred by the Seller Indemnified Parties, provided, that, in noevent shall the Purchaser’s liability exceed the amounts set forth in Section 8.04hereof.

 

SECTION 8.04. Limitation on Obligation to Indemnify.  Notwithstanding anything to the contrary contained in thisAgreement:

 

### (a)                                  anIndemnifying Party shall be liable for any claim for indemnification pursuantto Section 8.02(a) or 8.02(b) hereof, as applicable, only to the extent, andfor the amount, that the aggregate amount of indemnifiable Losses are in excessof $500,000; provided that, in determining the amount of such indemnifiableLosses (but not the breach thereof giving rise to indemnification) eachrepresentation shall be read without regard to any materiality, MaterialAdverse Effect or corollary qualifications contained therein;

###  

### (b)                                 inno event shall the obligations of all Indemnifying Parties, in the aggregate,to indemnify the Indemnified Party pursuant to this Article VIII exceed: (i)30% of the Purchase Price with respect to Losses arising from breaches of anyrepresentation or warranty made by the Indemnifying Party contained in theAcquisition Documents and (ii) 50% of the Purchase Price with respect to allLosses (including those covered in clause (i) above); and

 

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### (c)                                  theamount of Losses for which the Indemnifying Party shall be obligated toindemnify the Indemnified Party pursuant to this Article VIII shall be reducedby any amount received under any insurance policy by the Indemnified Party withrespect to such Losses.

###  

SECTION 8.05. Notice of Loss; Third Party Claims.  (a)  An Indemnified Party shall give the IndemnifyingParty notice of any matter which an Indemnified Party has determined has givenor could give rise to a right of indemnification under this Article VIII,promptly, but in any event, within 20 days of such determination, stating theamount of the Loss, if known, and method of computation thereof, and containinga reference to the provisions of this Agreement in respect of which such rightof indemnification is claimed or arises; provided, however, thatthe failure to provide such notice shall not release the Indemnifying Partyfrom any of its obligations under this Article VIII except to the extent thatthe Indemnifying Party is materially prejudiced by such failure and shall notrelieve the Indemnifying Party from any other obligation or Liability that it mayhave to any Indemnified Party otherwise than under this Article VIII.

 

### (b)                                 Ifan Indemnified Party shall receive notice of any Action, audit, demand orassessment (each, a “Third Party Claim”) against it or which may giverise to a claim for Loss under this Article VIII, promptly, but in any event,within 20 days of the receipt of such notice, the Indemnified Party shall givethe Indemnifying Party notice of such Third Party Claim; provided, however,that the failure to provide such notice shall not release the IndemnifyingParty from any of its obligations under this Article VIII except to the extentthat the Indemnifying Party is materially prejudiced by such failure and shallnot relieve the Indemnifying Party from any other obligation or Liability thatit may have to any Indemnified Party otherwise than under this ArticleVIII.  If the Indemnifying Partyacknowledges in writing its obligation to indemnify the Indemnified Partyhereunder against any Losses that may result from such Third Party Claim, thenthe Indemnifying Party shall be entitled to assume and control the defense ofsuch Third Party Claim at its expense and through counsel of its choice if itgives notice of its intention to do so to the Indemnified Party within fivedays of the receipt of such notice from the Indemnified Party; provided,however, that if there exists or is reasonably likely to exist aconflict of interest that, in the opinion of the Indemnified Party’s counsel (acopy of which shall be given to the Indemnifying Party), would make itinappropriate in the reasonable judgment of the Indemnified Party for the samecounsel to represent both the Indemnified Party and the Indemnifying Party,then the Indemnified Party shall be entitled to retain its own counsel in eachjurisdiction for which the Indemnified Party determines counsel is required, atthe expense of the Indemnifying Party. In the event that the Indemnifying Party exercises the right toundertake any such defense against any such Third Party Claim as providedabove, the Indemnified Party shall cooperate with the Indemnifying Party insuch defense and make available to the Indemnifying Party, at the IndemnifyingParty’s expense, all witnesses, pertinent records, materials and information inthe Indemnified Party’s possession or under the Indemnified Party’s controlrelating thereto as is reasonably required by the Indemnifying Party.  Similarly, in the event the IndemnifiedParty is, directly or indirectly, conducting the defense against any such ThirdParty Claim, the Indemnifying Party shall cooperate with the Indemnified Partyin such defense and make available to the Indemnified Party, at theIndemnifying Party’s expense, all such witnesses, records, materials andinformation in the Indemnifying Party’s possession or under the IndemnifyingParty’s control relating thereto as is reasonably required by the IndemnifiedParty.  No such Third Party Claim may besettled by the Indemnifying Party

 

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### without theprior written consent of the Indemnified Party which shall not be unreasonablywithheld unless such settlement shall involve only the payment of money with noadmission of wrongdoing.  In no eventmay an Indemnified Party settle any Third Party Claim without the prior writtenconsent of the Indemnifying Party.

###  

SECTION 8.06. Distributions from Escrow Fund. The Escrow Agent shall deliver to the Purchaser from the Escrow Fund anyamount determined to be owed to the Purchaser under this Article VIII inaccordance with the Escrow Agreement. For the purposes of clarity, to the extent that there is a shortfallbetween the amount owed by the Seller to the Purchaser in respect of theindemnification amount and the Escrow Fund, the Seller and Audiovox, jointlyand severally, shall be obligated to pay the Purchaser any such shortfall fromits own account, subject to the limitations of this Article VIII.

 

SECTION 8.07. Other Provisions.  Theindemnification provided in this Article VIII shall be, except in the case offraudulent misrepresentation, the sole and exclusive remedy for any of thematters set forth in Sections 8.02 and 8.03. In no event shall the Seller or the Purchaser be liable for loss ofprofits or consequential damages incurred by the Purchaser or the Seller, respectively,or any of its respective Affiliates. Upon making any payment to an Indemnified Party for any indemnificationclaim under this Agreement or any Acquisition Document, the Indemnifying Partyshall be subrogated, to the extent of such payment, to any rights which theIndemnifying Party or its Affiliates may have against other Persons (includingunder any insurance policies) with respect to the subject matter underlyingsuch indemnification claim.  TheIndemnified Party and its Affiliates shall cooperate with the IndemnifyingParty in pursuit of such rights and shall promptly turn over to theIndemnifying Party any payments received in respect of such rights.

 

SECTION 8.08. Tax Treatment.  The Sellerand the Purchaser agree that all payments made by any of the Seller andAudiovox on the one hand and the Purchaser on the other hand to or for thebenefit of the other under this Article VIII, under other indemnity provisionsof this Agreement and for any misrepresentations or breaches of warranties orcovenants shall be treated as adjustments to the Purchase Price for Taxpurposes and that such treatment shall govern for purposes hereof except to theextent that the Laws of a particular jurisdiction provide otherwise, in whichcase such payments shall be made in an amount sufficient to indemnify therelevant party on an after-Tax basis.

 

# ARTICLE IXTERMINATION, AMENDMENT AND WAIVER

#  

SECTION 9.01. Termination.  ThisAgreement may be terminated at any time prior to the Closing:

 

#### (a)                                  by(i) the Purchaser if between the date hereof and the Closing anyrepresentations, warranties or covenants of the Seller contained in thisAgreement shall have become untrue or incorrect such that Section 7.02(a) couldnot be satisfied or (ii) by the Seller or Audiovox if, between the date hereofand the Closing any representations,

 

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#### warranties orcovenants of the Purchaser contained in this Agreement shall have become untrueor incorrect such that Section 7.01(a) could not be satisfied;

####  

#### (b)                                 byeither the Seller or the Purchaser if the Closing shall not have occurred byDecember 15, 2004 (as such date shall be extended to January 15, 2005, solelyin the event that the condition set forth in Section 7.02(j) shall fail to havebeen satisfied or waived) (either such date being, as applicable, the “InitialTermination Date); provided, however, that the right toterminate this Agreement under this Section 9.01(b) shall not be availableto any party whose failure to fulfill any obligation under this Agreement shallhave been the cause of, or shall have resulted in, the failure of the Closingto occur on or prior to such date; provided, further, that at anytime after the Initial Termination Date, if the PRC Antitrust Approvals havenot been received, and at such time the Seller and Audiovox have satisfiedtheir conditions to Closing and are otherwise in all respects prepared to closethe transactions contemplated by this Agreement, then (i) the Seller mayterminate this Agreement and within two Business Days following suchtermination the Purchaser shall pay to the Seller by wire transfer ofimmediately available funds $1,000,000 as reimbursement for the Seller’sexpenses (the “Expense Reimbursement”) and (ii) the Purchaser may notterminate this Agreement; provided, further, that, at any timeafter February 15, 2005, the Purchaser may terminate this Agreement if on thedate of such termination the Purchaser shall pay to the Seller by wire transferof immediately available funds the Expense Reimbursement.

####  

#### (c)                                  byeither the Seller or the Purchaser in the event that any Governmental Authorityshall have issued an order, decree or ruling or taken any other actionrestraining, enjoining or otherwise prohibiting the transactions contemplated bythis Agreement and such order, decree, ruling or other action shall have becomefinal and nonappealable;

####  

#### (d)                                 bythe Purchaser if an Audiovox Triggering Event (as defined below) shall haveoccurred;

####  

#### (e)                                  bythe Purchaser or Audiovox or the Seller if this Agreement shall fail to receivethe requisite vote for approval at the Audiovox Stockholders’ Meeting;provided, that neither Audiovox nor the Seller shall be entitled to terminatethis Agreement pursuant to this clause (e) if the Stockholder shall have breachedthe Voting Agreement; or

####  

#### (f)                                    byAudiovox or the Seller if the Audiovox Board shall have recommended a SuperiorProposal in accordance with Section 5.06(c) or in order to enter into adefinitive agreement relating to a Superior Proposal; or

####  

#### (g)                                 bythe mutual written consent of the Seller and the Purchaser.

####  

For purposes of this Agreement, an “AudiovoxTriggering Event” shall be deemed to have occurred if:  (i) the Audiovox Board makes a Change in theAudiovox Recommendation; (ii) the Audiovox Board shall have recommended tothe stockholders of Audiovox a Competing Transaction or shall have resolved todo so; (iii) Audiovox shall have failed to include in the

 

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Proxy Statement the Audiovox Recommendation; (iv) theAudiovox Board fails to reaffirm the Audiovox Recommendation within sevenBusiness Days after the Purchaser reasonably requests in writing that suchrecommendation be reaffirmed;  or (v)Audiovox shall have intentionally breached its obligations under Section 5.06.

 

SECTION 9.02. Effect of Termination.  Inthe event of termination of this Agreement as provided in Section 9.01,this Agreement shall forthwith become void and there shall be no liability onthe part of either party hereto except (a) as set forth inSections 5.03 and 9.03, (b) that nothing herein shall relieve anyparty from liability for any breach of this Agreement and (c) the Purchasershall promptly return or destroy (and cause its agents and representatives toreturn or destroy) all documents (and copies thereof) relating to the Businessthat were furnished to the Purchaser and all excerpts therefrom and notesrelated thereto.

 

SECTION 9.03. Expenses.  (a)  Except as otherwise specified in thisAgreement, all costs and expenses, including fees and disbursements of counsel,financial advisors and accountants, incurred in connection with this Agreement(“Expenses”) and the transactions contemplated by this Agreement shallbe paid by the party incurring such Expenses, whether or not the Closing shallhave occurred.

 

(b)                                 Audiovoxagrees that:

 

###### (i)                                     ifthe Purchaser shall terminate this Agreement pursuant to Section 9.01(d); or

######  

###### (ii)                                  ifAudiovox or the Seller shall terminate this Agreement pursuant to Section9.01(f).

######  

then Audiovox shall pay to the Purchaser promptly (butin any event no later than one business day after the first of such eventsshall have occurred) a fee of 3.5% of the Purchase Price (the “Fee”),which amount shall be payable in immediately available funds, plus an amountequal to the amount of the Purchaser’s Expenses, up to a maximum of $1,000,000.

 

(c)                                  Audiovoxacknowledges that the agreements contained in this Section 9.03 are anintegral part of the transactions contemplated by this Agreement.  In the event that Audiovox shall fail to paythe Fee or any Expenses when due, the term “Expenses” shall be deemed toinclude the costs and expenses actually incurred or accrued by the Purchaser(including, without limitation, fees and expenses of counsel) in connection withthe collection under and enforcement of this Section 9.03, together withinterest on such unpaid Fee and Expenses, commencing on the date that the Feeor such Expenses became due, at a rate equal to the rate of interest publiclyannounced by Citibank, N.A., from time to time, in The City of New York, assuch bank’s Prime Rate plus 1.00 %. Payment of the fees and expenses described in this Section 9.03shall not be in lieu of any damages incurred in the event of willful orintentional breach of this Agreement.

 

SECTION 9.04. Amendment.  This Agreementmay not be amended or modified except (a) by an instrument in writingsigned by, or on behalf of, the Seller, Audiovox and the Purchaser or(b) by a waiver in accordance with Section 9.05.

 

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SECTION 9.05. Waiver.  Any term orcondition to this Agreement may be waived, or the time for the performance ofany of the obligations may be extended, at any time by the party that isentitled to the benefit thereof.  Anysuch extension or waiver shall be valid only if set forth in an instrument inwriting signed by the party to be bound thereby.  Any waiver of any term or condition shall not be construed as awaiver of any subsequent breach or a subsequent waiver of the same term orcondition, or a waiver of any other term or condition of this Agreement.  The failure of any party hereto to assertany of its rights hereunder shall not constitute a waiver of any of suchrights.  Except as otherwise set forthin this Agreement, all rights and remedies existing under this Agreement arecumulative to, and not exclusive of, any rights or remedies otherwiseavailable.

 

# ARTICLE X

#  

# GENERAL PROVISIONS

#  

SECTION 10.01.  Notices.  All notices, requests, claims, demands and other communicationshereunder shall be in writing and shall be given or made (and shall be deemedto have been duly given or made upon receipt) by delivery in person, by aninternationally recognized overnight courier service, by facsimile orregistered or certified mail (postage prepaid, return receipt requested) to therespective parties hereto at the following addresses (or at such other addressfor a party as shall be specified in a notice given in accordance with thisSection 10.01):

 
| (a)    |   | if to the Seller:                   |
|--------|--------|-------------------------------------|
|   |   |                                |
|   |   | Audiovox Communications Corp.       |
|   |   | 555 Wireless Blvd.                  |
|   |   | Hauppauge, NY  11788           |
|   |   | Attention:  Philip Christopher |
|   |   |                                |
|   |   | with a copy to:                     |
|   |   |                                |
|   |   | Levy, Stopol & Camelo,  LLP     |
|   |   | 190 EAB Plaza                       |
|   |   | East Tower-14th fl.                 |
|   |   | Uniondale, NY 11556                 |
|   |   | Attention:  Robert S. Levy     |
|   |   |                                |
|   |   |                                |
| (b)    |   | if to Audiovox:                     |
|   |   |                                |
|   |   | Audiovox Corporation                |
|   |   | 150 Marcus Blvd.                    |
|   |   | Hauppauge, NY 11788                 |
|   |   | Attention:  Charles M. Stoehr  |

 

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|   |   | with a copy to:                     |   |
|--------|--------|-------------------------------------|--------|
|   |   |                                |   |
|   |   | Levy, Stopol & Camelo,  LLP     |   |
|   |   | 190 EAB Plaza                       |   |
|   |   | East Tower-14th fl.                 |   |
|   |   | Uniondale, NY 11556                 |   |
|   |   | Attention:  Robert S. Levy     |   |
|   |   |                                |   |
| (c)    |   | if to the Purchaser:                |   |
|   |   |                                |   |
|   |   | UTStarcom Inc.                      |   |
|   |   | 1275 Harbor Bay Parkway             |   |
|   |   | Alameda, CA  94502             |   |
|   |   | Telecopy:  (510) 864-8802      |   |
|   |   | Attention:  General Counsel    |   |
|   |   |                                |   |
|   |   |                                |   |
|   |   | with a copy to:                     |   |
|   |   |                                |   |
|   |   | Shearman & Sterling LLP         |   |
|   |   | 1080 Marsh Road                     |   |
|   |   | Menlo Park, CA  94025          |   |
|   |   | Telecopy:  (650) 838-3699      |   |
|   |   | Attention:  Carmen Chang, Esq. |   |

 

SECTION 10.02.  Public Announcements.  Unless otherwise required by securitiesexchange rule or regulation or the rules and regulations of any national stockexchange, none of the parties hereto shall make, or cause to be made, any pressrelease or public announcement in respect of the Acquisition Documents,including this Agreement and the Ancillary Agreements, or the transactionscontemplated hereby and thereby or otherwise communicate with any news mediawithout prior written consent of the other parties, and the parties heretoshall cooperate as to the timing and contents of any such press release, publicannouncement or communication.

 

SECTION 10.03.  Severability.  If any term or other provision of thisAgreement is invalid, illegal or incapable of being enforced by any Law orpublic policy, all other terms and provisions of this Agreement shallnevertheless remain in full force and effect for so long as the economic orlegal substance of the transactions contemplated hereby is not affected in anymanner materially adverse to either party hereto.  Upon such determination that any term or other provision isinvalid, illegal or incapable of being enforced, the parties hereto shallnegotiate in good faith to modify this Agreement so as to effect the originalintent of the parties as closely as possible in an acceptable manner in orderthat the transactions contemplated hereby are consummated as originallycontemplated to the greatest extent possible.

 

SECTION 10.04.  Entire Agreement.  This Agreement and the Ancillary Agreementsconstitute the entire agreement of the parties hereto with respect to thesubject

 

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matter hereof and thereofand supersede all prior agreements and undertakings, both written and oral,among the parties with respect to the subject matter hereof and thereof.

 

SECTION 10.05.  Assignment.  This Agreement may not be assigned by operation of law orotherwise without the express written consent of the Seller and the Purchaser(which consent may be granted or withheld in the sole discretion of the Selleror the Purchaser); provided, however, that the Purchaser mayassign this Agreement or any of its rights and obligations hereunder to one ormore Affiliates of the Purchaser without the consent of the Seller but,notwithstanding such assignment, the Purchaser shall remain fully liablehereunder.

 

SECTION 10.06.  No Third Party Beneficiaries.  Except for the provisions ofArticle VIII relating to indemnified parties, this Agreement shall bebinding upon and inure solely to the benefit of the parties hereto and theirrespective successors and permitted assigns and nothing herein, express orimplied, is intended to or shall confer upon any other Person, including anyunion or any employee or former employee of the Seller, any legal or equitableright, benefit or remedy of any nature whatsoever, including any rights ofemployment for any specified period, under or by reason of this Agreement.

 

SECTION 10.07.  Governing Law.  This Agreement shall be governed by, andconstrued in accordance with, the laws of the State of New York applicable tocontracts executed in and to be performed in that State.

 

SECTION 10.08.  Waiver of Jury Trial.  Each of the parties hereto hereby waives tothe fullest extent permitted by applicable law any right it may have to a trialby jury with respect to any litigation directly or indirectly arising out of,under or in connection with this Agreement or the transactions contemplated bythis Agreement.  Each of the partieshereto hereby (a) certifies that no representative, agent or attorney of theother party has represented, expressly or otherwise, that such other partywould not, in the event of litigation, seek to enforce the foregoing waiver and(b) acknowledges that it has been induced to enter into this Agreement and thetransactions contemplated by this Agreement and the Acquisition Agreements, asapplicable, by, among other things, the mutual waivers and certifications inthis Section 10.08.

 

SECTION 10.09.  Arbitration.  All disputes arising out of or in connectionwith this Agreement, the Acquisition Documents, and the transactionscontemplated hereby and thereby, which cannot be resolved through theprocedures described herein or therein shall be finally resolved solely andexclusively by means of arbitration under the Commercial Arbitration Rules of theAmerican Arbitration Association (“AAA”) to be conducted in English inthe City of New York.  The arbitrationshall be conducted by three (3) arbitrators appointed by agreement of theparties, or failing such agreement, under the Commercial Arbitration Rules ofthe American Arbitration Association. The arbitration will proceed in accordance with the AAA’s CommercialArbitration Rules.  The decision of thearbitrator shall be final, conclusive, and binding upon the parties, and ajudgment upon the award may be obtained and entered in any federal or statecourt of competent jurisdiction.  Theparties agree that any arbitration shall be kept confidential and any elementof such arbitration (including but not limited to any pleadings, briefs orother documents submitted or exchanged, any testimony or other oralsubmissions, and any awards) shall not be disclosed beyond the arbitraltribunal, the parties, their counsel and any person necessary to conduct thearbitration, except as may be required in recognition and

 

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enforcement proceedings,if any, or in order to satisfy disclosure obligations imposed by any applicableLaw.  The parties agree to cooperate inproviding each other with all discovery, including but not limited to theexchange of documents and depositions of parties and non-parties, reasonablyrelated to the issues in the arbitration. If the parties are unable to agree on any matter relating to such discovery,any such difference shall be determined by the arbitrator.  The award of the arbitrator shall be finaland binding upon the parties, and shall not be subject to any appeal orreview.  The parties agree that such awardmay be recognized and enforced in any court of competent jurisdiction.  The parties also agree to submit to thenon-exclusive personal jurisdiction of the federal and state courts sitting inNew York, New York, for the limited purpose of enforcing this arbitrationagreement (including, where appropriate, issuing injunctive relief) or anyaward resulting from arbitration pursuant to this Section 10.09.  The parties agree that the arbitrationproceeding described in this Section 10.09 is the sole and exclusive manner inwhich the parties may resolve disputes arising out of or in connection withthis Agreement and the Acquisition Documents. The arbitrator has the discretion to grant the prevailing party in anyarbitration attorneys’ fees and costs and make the non-prevailing partyresponsible for all expenses of the arbitration.

 

SECTION 10.10.  Currency.  Unless otherwise specified in this Agreement, all references tocurrency, monetary values and dollars set forth herein shall mean United States(U.S.) dollars and all payments hereunder shall be made in United Statesdollars.

 

SECTION 10.11.  Counterparts.  This Agreement may be executed and delivered(including by facsimile transmission) in one or more counterparts, and by thedifferent parties hereto in separate counterparts, each of which when executedshall be deemed to be an original, but all of which taken together shallconstitute one and the same agreement.

 

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IN WITNESS WHEREOF, the parties hereto have causedthis Agreement to be executed as of the date first written above by theirrespective officers thereunto duly authorized.

 
|   | AUDIOVOX COMMUNICATIONS  CORP.             |
|--------|--------------------------------------------|
|   |                                       |
|   |                                       |
|   | By:                                        | /s/ Charles M. Stoehr |   |
|   |                                       | Name:  Charles M. Stoehr |   |
|   |                                       | Title:  Vice President |   |
|   |                                       |   |   |
|   |                                       |   |   |
|   | QUINTEX MOBILE COMMUNICATIONS  CORPORATION |
|   |                                       |   |   |
|   |                                       |   |   |
|   | By:                                        | /s/ Charles M. Stoehr |   |
|   |                                       | Name:  Charles M. Stoehr |   |
|   |                                       | Title:  Vice President |   |
|   |                                       |   |   |
|   |                                       |   |   |
|   | AUDIOVOX COMMUNICATIONS  CANADA CO.        |   |
|   |                                       |   |   |
|   |                                       |   |   |
|   | By:                                        | /s/ Charles M. Stoehr |   |
|   |                                       | Name:  Charles M. Stoehr |   |
|   |                                       | Title:  Vice President |   |
|   |                                       |   |   |
|   |                                       |   |   |
|   | UTSTARCOM, INC.                            |   |
|   |                                       |   |   |
|   |                                       |   |   |
|   | By:                                        | /s/ Michael J. Sophie |   |
|   |                                       | Name:  Michael J. Sophie |   |
|   |                                       | Title: | Chief Financial Officer  and  Senior Vice President |   |
|   |                                       |   |   |
|   |                                       |   |   |
|   | UTSTARCOM CANADA COMPANY                   |   |
|   |                                       |   |   |
|   | By:                                        | /s/ Michael J. Sophie |   |
|   |                                       | Name:  Michael J. Sophie |   |
|   |                                       | Title: | Chief Financial Officer  and  Senior Vice President |   |

 

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|   | (With respect to Sections 2.05, 2.07, 2.09, 3.01, 3.02, 3.11(b),  3.30, 5.06, 5.08, 5.19, 5.20, 5.21, 5.22, 5.24 and Articles VII – X only) |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                             |
|   | AUDIOVOX CORPORATION                                                                                                                             |
|   |                                                                                                                                             |
|   |                                                                                                                                             |
|   | By:                                                                                                                                              | /s/ John J. Shalam |   |
|   |                                                                                                                                             | Name:  John J. Shalam |   |
|   |                                                                                                                                             | Title:  Chief Executive Officer |   |

 

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